Page images
PDF
EPUB
[ocr errors][merged small][merged small][merged small]

Enrollee cost sharing is sometimes defined to also include the enrollee's share of the premium payment. For typical large and medium private sector employer plans, the employer generally pays the full premium for employee-only coverage, but requires the enrollee to pay about 25 percent of the premium for family coverage.

have 22

Employment

[merged small][merged small][ocr errors]
[blocks in formation]

More than half (52 percent) of the uninsured are employed; most of the working uninsured (59 percent) are in small firms of less than 100. Workers whose jobs did not provide health insurance tended to be part-time rather than full-time workers, young rather than older workers, lower-paid rather than higherpaid workers, in small firms rather than in large firms. These workers also tended to be employed in the service-producing and retail sectors of the economy. Between two-thirds and four-fifths of the uninsured live in families where someone is employed.

[ocr errors]

ured

In addition to enrollee cost-sharing requirements, other features are included in health plans to attempt

to control plan costs. These include alternative financmercentazi

ing arrangements such as self insurance; premium cost that this

sharing between plan sponsor and enrollee; financial

incentives to use services less costly than hospital egresse

care, such as home health care, hospice service, urgent care centers, etc.; managed care techniques,

such as hospital utilization review and second surgical efit a yerinde opinion requirements, and health promotion programs of-pocit : such as smoking cessation, substance abuse, weight rearing med duction, and stress management. Another technique

for controlling plan costs is to use preexisting condi

tion clauses, which temporarily or permanently ex23.10 c clude from coverage an enrollee's medical condition scovering that existed prior to coverage by the health plan.

Income

insured as

[ocr errors]

Over half (61 percent) of the uninsured are low income (family income under $20,000). About 30 percent of uninsured persons live in families with incomes below the Federal poverty threshold for their family size.

WHO DOES NOT HAVE HEALTH CARE COVERAGE?

[ocr errors]

ISSUES IN DESIGNING A HEALTH BENEFITS PLAN

to the

General

[ocr errors]

An estimated 36.8 million nonaged Americans (17.5 percent of persons under age 65) lack health insurance coverage. Persons who do not privately obtain health insurance, either through their jobs or by purchasing insurance, sometimes receive coverage from Government programs such as Medicaid. However, coverage from Government programs is contingent on meeting certain program eligibility requirements. Those who do not have private coverage and either do not meet the eligibility requirements of Government programs

or choose not to participate in them are the 36.8 miluse of this lion (17.5 percent) who are uninsured. The charac

ollee cesti ration ying

A health plan's benefits are designed to pay either all or a portion of the health care expenses of the population covered by the health plan. This is presumably the purpose of insurance—to ensure that the health care services used by the covered population are paid for, that unexpected health care expenses can be paid for, and that financial means do not become a barrier to seeking or receiving health care services.

[ocr errors]

Several questions need to be asked when designing a health benefits plan. These include:

-What benefits will be included? What is a "basic"

health benefits plan? How should the population

to be covered help determine a plan's benefits? -What are some health benefit plan options? - What is the cost of the plan?

teristics of the uninsured are described below.

i

deizt tilizಜೆ

teals Last

Willard G. Manning, et al., “Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment,” American Economic Review (June 1987): 251-277.

* The statistics on the uninsured are based on a Congressional Research Service analysis of the March 1987 Current Population Survey (CPS), a household survey conducted by the Census Bureau. The March 1987 CPS collected information on health insurance coverage for 1986. A more detailed description of these statistics can be found in: U.S. Congress, House Committees on Education and Labor, Energy and Commerce, and Senate Special Committee on Aging, Cost and Effects of Extending Health Insurance Coverage, 100th Cong., 20 Sess., October 1988.

000/laurea

lower

ta eness

d) for people

59

[merged small][merged small][merged small][ocr errors]

appear to be influenced by the facts of the individual case, rather than the specific structure of the state immunity laws.89 Concerns about the confidentiality of peer review will likely continue to be an area of active litigation in the 1990s, especially as more states pass laws encouraging organizational peer review and quality assurance activities, and require that some of this data be turned over to the state for regulatory

count

IDIO E

[ocr errors]

purposes.90

Hoi of med compa Comp compe Board

me te couplir to med

First, physicians who have suffered suspension of credentials may claim that their due process rights were not respected, especially in cases involving public hospitals. 84 Alternatively, physicians may seek rights of cross examination and other trappings of adjudicative process.85 More importantly, physicians who lose their practice privileges may allege antitrust violations: the aggrieved physician will claim that the decision to suspend privileges was not motivated by concerns about quality of care, but rather was an attempt to curb competition in the specialty area. 86 Indeed peer review activities are now drawing considerable antitrust scrutiny, a trend that will likely accelerate in light of a recent Supreme Court decision.87 Yet another concern of physicians who serve on peer review committees is the threat of involvement in malpractice litigation. Since these committees often pass judgment on specific incidents involving physicians on the medical staff, their activities are of special interest to plaintiffs' attorneys who would like access to peer review committee documents. While most states provide explicit immunity for peer review activities, some state courts have managed to find exceptions to these statutes in order to allow discovery of the peer review data. 88 Such judicial decisions

These various types of litigation create serious concerns on the part of physicians involved in peer review. Even those physicians who recognize that the best long-term response to malpractice litigation is better quality medical practice, and that a physician's peers are better judges of medical care than lawyers or juries, are hesitant to become involved in peer review activities that may lead to litigation. While this is and will continue to be a significant problem even in the present system of tort litigation, it would become even more prominent if one moved to general organizational liability of hospitals. Thus, any comprehensive effort to address medical malpractice litigation must also address the legal problems raised by peer review activities.

[merged small][merged small][ocr errors][merged small][ocr errors][ocr errors][ocr errors][ocr errors][ocr errors][ocr errors][ocr errors]

No-Fault Patient Compensation—The drawbacks of both traditional tort litigation and of those alternatives that still rely on determinations of fault have led a number of people to advocate "no fault” approaches to medical injury compensation. As far back as the early 1970s, a number of scholars were proposing partial or complete no-fault systems. 91 The partial no fault approaches center on accelerated compensation for designated injuries that are quite likely to be avoidable.92 These particular injuries would be extracted from the tort regime and be compensated administratively. Medical adversity insurance differs from pure no-fault or social insurance in that the providers of care remain responsible for paying for the listed outcomes a form of “strict liability" through provider-purchased, experience-rated casualty insurance. More recently, proponents have been able to draw on the experience of New Zealand RS and

[ocr errors][ocr errors]

84 See Richardson v. St. Johns Mercy Hospital, 674 S.W.2d 200 (Mo.App.1984).

86 See Rao v. St. Elizabeth's Hospital, 488 N.B.2d 685 (III. App. 5 Dist. 1986).

88 It seems likely that there will be more antitrust litigation in the future. Since 1975, with the decision of Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975), the Supreme Court has indicated that the practice of the learned professions will be considered commerce, and thus subject to the scrutiny of the antitrust laws. The initial Supreme Court cases regarding health care antitrust concerned efforts to remove anticompetitive rules which had been put in place by insurers and providers. See Union Labor Life Insurance Company v. Pireno, 458 U.S. 119 (1981); Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1981). Soon however, aggrieved individuals began to request antitrust scrutiny regarding the behavior of individual hospitals or physicians. See Jefferson Parish Hospital District #2 v. Hyde, 466 U.S. 2 (1984); Weiss v. York Hospital, 745 F.2d 786 (3rd Cir. 1984).

are 520

Voss

23. The a

My faolt

87 See Patrick v. Burger, 108 S.Ct. 1658 (1988). With the decision of Patrick v. Burget, the Supreme Court indicated that the state action doctrine would not immunize state-required peer review activities by private hospital staffs from antitrust litigation unless states provided official review of such private decisions. Although the Health Care Quality Improvement Act of 1986 was intended to limit antitrust litigation regarding peer review, many observers doubt that it will have this effect. See e.g. Colantonio, “The Health Care Quality Improvement Act of 1986 and its Impact on Hospital Law," West Virginia Law Review 91 (1988): 91; Blumstein and Sloan, “Antitrust in Hospital Peer Review," Law and Contemporary Problems 51 (1988): 7. Thus we can expect continued antitrust scrutiny of peer review activities. See Bolt v. Halifax Hospital Medical Center, 851 F.2d 1273 (11th Circuit), vacated and petition for rehearing en banc granted, 861 F.2d 1233 (11th Cir. 1988), reinstated in part and vacated in part en banc, 874 F.2d 755 (11th Cir. 1989). Lawyers have had some doubts about bringing antitrust suits in this area, and since the major Supreme Court decision is so recent, it is difficult to predict the amount of litigation that will occur in the future. Nonetheless, the Patrick decision can only serve as a litigation incentive.

88 See Kalish v. Mt. Sinai Hospital, 270 N.W. 2d 783 (Minn. 1978).

89 Compare Coburn v. Seda, 677 P.2d 173 (1984), with Chandra v. Sprin kle, 678 S.W.2d 804 (Mo. 1984).

oo See e.g. Beth Israel Hospital Association v. The Board of Registration in Medicine, 515 N.E.2d 574 (Mass. 1987).

° See Havighurst and Tancredi, "Medical Adversity Insurance, a No Fault to Medical Malpractice and Quality Assurance," Insurance Law Journal 613 (1974): 69; O'Connell, “No-Fault Insurance for Injuries Arising from Medical Treatment: A Proposal for Elective Coverage,” Emory Law Journal 24 (1975): 21.

»See Tancredi, “Designing a No-Fault Alternative," Law and Contempo rary Problems 49 (1986): 277; American Bar Association, Designated Compet: sable Event System: A Feasibility Study (1979). The latest iteration of the concept is the ACE (accelerated compensable event).

03 See Gellhorn, “Medical Malpractice Litigation (U.S.)- Medical Mishap

Compensation (N.Z.)," Cornell Law Review 73 (1988): 170.

[blocks in formation]

would do away with the deterrent effect of medical malpractice litigation. This contention, however, overlooks the fact that no-fault is still a mode of legal liability with one party required to compensate the victims of its activities, and the requisite insurance would likely be provided at the level of hospital or other health care organization where premiums could be strongly experience rated. 102

How does a no-fault system work for compensation of medical injury? In Sweden, a combine of insurance companies provides a no-fault insurance program. Complementing, yet separate from, the insurance compensation plan is the Medical Responsibility Board (MRB) that hears complaints about quality of care rendered to individuals. 99 The advantage of uncoupling the compensation and deterrent approaches to medical injuries as the Swedes have done is that it frees both functions from the adversarial notions of tort litigation, providing greater and more equitable compensation and stronger deterrence signals. 100

Recently, we have completed a study of medical injury, and the costs arising out of such injury, in the state of New York. The data from this study indicate that in New York, at least, one can provide full compensation for the net financial losses of all seriously injured patients for roughly the same amount expended on litigation for only a selected number of those negligently injured. 103

Nonetheless, there are significant problems with the no-fault approach. Many have argued that our major present-day use of no-fault within workers' compensation has failed to provide appropriate compensation for individuals suffering from occupational diseases. 101 Still others fear that a no-fault approach

Social Insurance—The relationship between providing health insurance for all Americans and tort reform must be underlined, because comprehensive health benefits would deal directly with many of the patient losses for which malpractice litigation now seeks redress. One major advantage of the Swedish and New Zealand systems for no-fault insurance for medical injury is that these compensation systems are nestled within a much more encompassing safety net of social welfare programs. For instance, in Sweden, there is a national health system that provides medical care for all individuals and comprehensive disability insurance for lost earnings. Thus their no-fault system does not absorb much of the costs arising out of an iatrogenic injury, and the smaller stake in the outcome reduces the intensity of conflict in individual cases.

Broader disability insurance and sick leave benefits would also decrease the overall costs associated with compensation programs for iatrogenic injury. When a collateral source offset is in place, any increase in the coverage of first party loss insurance correspondingly reduces the losses left to be handled by the much more expensive system of third party malpractice insurance.

Beyond Health Care Providers-Malpractice litigation is not the only aspect of tort law that plays a major role in the health care area. Just as prominent and often just as troubling are product liability suits against manufacturers of vaccines, prescription drugs and other medical appliances. Indeed, many of these cases are the result of the combined action of a manuCONCLUSION

** See Rosenthal, Dealing With Medical Malpractice: The British and Swedish Experience, (1988) 131-206.

$5 See Halley, Fowks, Bigler, Ryan, Medical Malpractice Solutions: Systems and Proposals for Injury Compensation (Springfield, I., Charles Thomas 1989).

96 See British Medical Association, No-Fault Compensation Working Party Report (1987); R. Prichard, Medical Malpractice (1989).

97 See White, “Innovative No-Fault Tort Reform for an Endangered Specialty,” Virginia Law Review 74 (1988): 1487. Some have criticized the Virginia system for only controlling cases of people who would probably recover in the tort system, thereby resulting in less compensation for them and no more compensation for others. See Gallup, “Can No-Fault Compensation of Impaired Infants Alleviate the Malpractice Crisis in Obstetrics?" Journal of Health Politics, Policy and Law, 14 (1989): 69.

98 A patient seeking compensation for medical injury must merely show that her injuries are of a designated type and compensation is available. There need be no allegation of negligence, and thus physicians often assist their patients in the effort to secure compensation. See Oldertz, “The Swedish Patient Insurance Scheme-Eight Years of Experience," Medical Legal Journal 52 (1984): 43.

99 Most such complaints are brought by patients but physicians are encouraged to self-report to their department heads who in return report to the MRB. The MRB can discipline physicians who provide poor quality care or can decide that no action is necessary. The MRB has both expert input and political and citizen representatives, similar to the boards envisioned by the AMA's fault-based system.

100 Patient compensation is more straightforward in the absence of the corrective justice aspects of tort litigation. Physicians can actually assist patients in their efforts to receive compensation. On the other hand, since compensation is not directly sought from the physician or his insurer, data regarding sub-standard care is more freely available. Quality assurance efforts proceed smoothly, free from concerns about investigations by plaintiffs attor. neys regarding the quality assurance data. Thus, at least in theory, a no-fault system would provide greater compensation and clearer deterrent signals.

101 See Barth and Hunt, Workers Compensation and Work-Related Illnesses and Diseases (1980): see also Kutchins, “The Most Exclusive Remedy is No Remedy At All: Workers Compensation Coverage for Occupational Diseases," Lobor Law Journal 32 (1981): 219-20. Indeed, one might conjecture that determining causation in medical injury cases may be much more difficult than determining causation in workers' compensation cases in that most patients will have a significant background of disease from which the medical care-induced injury must be disentangled. Thus no-fault approaches to medical injuries will likely have inherently higher administrative costs than workers' compensation.

102 The best work on workers' compensation and deterrence suggests that workers' compensation has a considerable preventive effect on workplace fatalities. See Viscusi and Moore, Compensation Mechanisms for Job Risks: Wages, Workers' Compensation and Product Liability (forthcoming, Princeton University Press).

103 See Harvard Medical Practice Study, Patients, Doctors, and Lawyers (1990), chap. 8.

facturer which designs and markets the drug and a physician—the learned intermediary-who prescribes the drug for a patient. 104 Thus, any effort to cut back sharply on the tort liability of the doctor is likely to redirect the pressure by the victim for tort relief towards the manufacturer (as has recently been evident in the rise of third party product suits by employees covered by no-fault workers' compensation). Because drug manufacturers do operate within a national market, the federal government must be especially sensitive to the possible impact of measures directed at doctors and patients alone. 105 This is not to imply that there is no legitimate federal responsibility for malpractice law itself. As the largest third party purchaser of health care, the federal government must be concerned about the impact of tort litigation on the costs and quality of that care. In addition, the federal government must be sensitive to the way its own legal policies (e.g., antitrust) interact with and occasionally obstruct the efforts by individual states to improve the situation. 106

We have reviewed a broad array of issues posed by malpractice litigation for the health care system. In the mid-70's and in the mid-80's, providers in many regions of the country felt grave concern about spiralling liability costs. Although much of the hue and cry has died down now that premium levels have plateaued, the empirical research we reviewed earlier shows there is ample room for another upsurge in the 90's in malpractice claims and premiums.

In the interim, a host of policy changes have been proposed and adopted within each of the health care, legal, and insurance systems whose interplay generates the observed rates of patient injuries, tort claims, and premium costs. We were asked to provide here a review of the arguments for and against these various ideas, not to spell out and to defend our own favored proposals. As we have tried to indicate, though, there are no easy solutions to this complex set of problems: indeed, apparently desirable changes in one area of the law (e.g., antitrust) may run counter to equally appealing initiatives taken elsewhere (e.g., quality assurance through peer review). Too often conventional tort reform has reflected a rather narrow view not just of the actual source of the problems posed by malpractice litigation for doctors, but also of the need for some such liability mechanism to insure safe care for patients. Recently, some systematic empirical and analytical work has begun to emerge about more fundamental possibilities—e.g., the AMA's administrative fault proposal and the New York state study of the incidence, compensation, and prevention of patient injuries. At this point of time, then, it would be premature to endorse specific proposals for statutory change, especially for enactment at the national level. What is needed, instead, is careful analysis of the growing body of data now available, and the design, implementation, and evaluation of demonstration projects. We would hope that this Commission, whose primary focus is the availability and affordability of medical care, would recommend that a similarly systematic inquiry be mounted about the ways in which malpractice litigation or its alternatives can best enhance the quality of the medical care thereby provided.

104 See Shulman, “The Broader Message of Acutane," American Journal of Public Health 79 (1989): 1565-1570. For a recent, revealing illustration of this phenomenon, see O'Gilvie v. International Playtex, Inc., 821 F. 2d. 1438 (10th Cir. 1987), where a doctor's misdiagnosis of toxic shock syndrome precipitated an $11.5 million jury verdict against the product manufacturer, including $10 million in punitive damages.

106 In Sweden, the institution of a no-fault insurance approach to medical injury was wedded to a no-fault program for compensation for drug related injuries, a program which is underwritten by drug companies. See Rosenthal, Dealing With Medical Malpractice: The British and Swedish Experience. In this country, a no-fault system for vaccine related injury has recently been insti*uted by the United States Congress. Vaccines represent one of the two exreptions to the learned intermediary rule and thus vaccine manufacturers nust provide patients with a warning concerning the risks associated with vaccination. See Reyes v. Wyeth Laboratories, 498 F.2d 1264 (5th Cir. 1973), cert. denied, 419 U.S. 1096 (1974). At least partially as a result of this requirement regarding warning, vaccine manufacturers have faced a great deal of product liability litigation arising out of parties injured by vaccines. See Institute of Medicine, Vaccine Supply and Innovation (1985).

In response, Congress passed an amendment to Title III of the Omnibus Health Legislation which was known as the National Childhood Vaccine Injury Act. See S.1744, 99th Cong., 2d sess. (1986). The Act creates a mandatory no-fault compensation scheme for individuals injured by childhood vaccines. An injured party may either accept compensation awarded through the no-fault proceeding or bring a separate civil suit, but in the latter circumstance, theories of liabilities are significantly limited. Under the no-fault scheme, burden of proofs are lower, as is the potential compensation. A trust fund, consisting of an excise tax on dosages of childhood vaccine, provides compensation. See Budget Reconciliation Act of 1987, P.L. 100–203, sec. 4301-07.

Of course, childhood vaccines may be a special case. They are a necessary public health tool but not an area of great profit making by drug companies. Therefore, the industry's threats to absent itself from the marketplace in this particularly important area are likely to bring about Congressional intervention. Other types of drugs might have less of a claim on Congressional attention. Nonetheless, the Vaccine Act demonstrates that tort reform could extend itself to drugs and other products. We await some further maturation of this program so as to evaluate how well it functions.

106 Consider the following example. New York State's Malpractice Reform Bill of 1986 required hospitals to purchase excess coverage for physicians practicing on the staffs of the hospitals. Thus the hospitals had to bear new costs. They passed these costs along to Blue Cross/Blue Shield, commercial insurers, and to the state Medicaid program. However, federal Medi

care disallowed any reimbursement for these purposes, and the issue is still in litigation. This demonstrates how the prominent federal role in the provision of medical care creates federal interest in tort reform.

DESIGN OF HEALTH PLAN BENEFITS FOR THE

NONELDERLY

Janet Lundy *

WHAT ARE THE BENEFIT DESIGN FEATURES OF FEE-FOR-SERVICE HEALTH PLANS?

As you requested, this paper provides background information on health plan benefits and a discussion of a standard, or “basic,” health benefit plan. Also included is a discussion of how health plan benefits are designed to meet certain requirements, such as the need to cover certain population groups (e.g., the low income) or to conform to certain cost constraints. In addition, the paper presents and discusses several health benefit plan options.

The focus of this paper is on fee-for-service plan benefits, which is the most prevalent type of coverage in this country, as opposed to the benefit structure of health maintenance organizations. In addition, the discussion focuses only on health benefits for the nonelderly (under age 65) population.

The design of a health plan's benefits includes several features that define the benefits and help to determine what the benefits will cost. These benefit features include (1) covered services, (2) limits on allowable charges, (3) limits on services covered or total payments, (4) enrollee cost sharing and catastrophic protection, and (5) cost containment features. Only the first feature, covered services, pertains to the types of health care services covered by a plan; the other features define how the costs of health care services are divided between the plan and the plan enrollees.

Covered and Excluded Health Care Services

The specification of the five health benefit plan options was determined in discussions with you. We agreed that we would use three plans already developed by the Congressional Research Service (CRS) as illustrative plans for our project on health insurance for the uninsured: a "typical” private employer-based plan, a “tailored” plan designed for the low-income, and a “catastrophic” plan for medical expenses that are large compared to family income. In addition, you requested that we develop (1) a typical plan that includes preventive services and (2) a reduced typical plan which includes greater enrollee cost sharing and excludes mental health and dental services, but includes preventive services. The relatively lengthy discussion of preventive services responds to your request for information on these frequently uncovered services.

The major types of health care services that health plans cover include hospital services (inpatient and outpatient), surgical services (inpatient and outpatient), physician services, X-ray and laboratory tests, emergency care, prescription drugs, and mental health care, including substance abuse (inpatient and outpatient). Most employer health plans cover these benefits. What varies more from plan to plan than the types of services covered are the reimbursement levels for each service and the plan's cost containment features.

Other services sometimes covered in health plans include dental care, vision care, well-baby and child care, preventive care including routine physical examinations, home health services, and care in an extended care facility.

Any costs enrollees incur for services not covered by a health plan ("excluded” services) are neither paid for by the plan nor applied toward the plan's deductible requirements or catastrophic limits (described below). Examples of services and expenses that

• Report prepared by Janet Lundy, Specialist in Social Legislation, Education and Public Welfare Division, Congressional Research Service, October 24, 1989.

re

« PreviousContinue »