The Patients' Bill of Rights: All about Lawsuits

Commentary by Pete du Pont

Is it possible to take a bad bill and a worse bill and merge them into a good bill? Not likely, but that's the task facing a conference committee when Congress returns to Washington from its August break. Its members will try to reconcile two versions of a Patients' Bill of Rights, one passed by the House and one by the Senate.

Probably the most beneficial outcome for the citizenry would be for the conferees to talk and talk, and finally give up, leaving both bills to die.

Supporters of both bills seem to agree that either will cause health insurance to be more expensive and increase the number of uninsured, although they differ on by how much and how many. Thus many of the very same members of Congress who are lamenting the fact that some 43 million Americans don't have health insurance are preparing to support legislation that will raise the expense hurdle for those 43 million - and swell their ranks.

That being the case, why do we need a Patients' Bill of Rights? To guarantee access and to allow patients to sue their HMOs, we are told. But under market pressure, most health plans already allow, or are beginning to allow, the access provided for in both bills.

That leaves an expanded right to sue as the main point of issue - the one on which the House and Senate bills differ most and the one the conference committee may not be able to resolve.

You can already sue a health plan in federal court for wrongful denial of coverage, but can collect only the monetary value of the coverage that was denied.

The legislation passed by the Senate would allow unlimited non-economic damages and punitive damages of up to $5 million in federal court. In addition, it would let a patient sue in state court over care and collect whatever state law allows.

Under the House bill, patients can collect up to $1.5 million in non-economic damages in either state or federal court, as well as up to $1.5 million in punitive damages if a health plan refuses to provide care even after being ordered by an outside appeals board. The House version preempts laws in states that allow higher damages.

Both bills require patients to first present their case to an outside appeals board, and both have provisions aimed at shielding employers from being involved in the lawsuits unless the employers participate directly in health care decisions. Nonetheless, both bills encourage more litigation, leading some to suggest the legislation should be called the "Lawyers' Right to Bill" rather than the "Patients' Bill of Rights."

Most disputes over health care coverage don't have to be handled that way. It would be better if health plans and their members could have a mechanism for settling without litigation. Take, for example, the "Early Offers" approach devised by Jeffrey O'Connell, a law professor at the University of Virginia.

If a patient claimed that a health plan had refused to provide a covered treatment, the plan could make an Early Offer to (1) settle the claim by providing the treatment or paying for its cost, {2) pay any economic damages suffered by the patient because treatment was delayed, and (3) pay for the patient to hire a lawyer to assess the offer. The patient could accept the offer and receive the settlement, or reject it and still go to court. If the patient went to court, he or she would have to present clear and convincing evidence that the plan had violated the terms of the coverage and that denial was wanton or outrageous.

Plans can already offer a settlement immediately, but are reluctant to do so because the patient may decide to hold out for more. With legislation formalizing the Early Offers approach, the plan would have an incentive to make a qualifying offer and the patient would have an incentive to accept it.

Instead, we are faced with the prospect of more litigation, higher insurance costs and fewer people with health insurance, all having a perverse effect on overall health care reform. Instead of increasing the number of people without health care coverage, we need to be increasing the number with coverage. That's why the House provision to allow permanent, unlimited access to medical savings accounts, a move that by one estimate would result in 9 million more people having health care coverage, is the most constructive thing in either bill.

Congress approved a pilot MSA program in 1996, but the approval was temporary and carried so many restrictions that few insurance companies marketed an MSA plan and few people have them.