The healthcare disaster that wasn't

When Texas passed its patients' bill of rights law, George W. Bush warned that it would unleash a plague of lawyers and drive up health costs. It didn't.

Published July 17, 2001 11:04PM (EDT)

George Parker Young is a Fort Worth, Texas, attorney -- "not Dallas," he specifies, "Fort Worth" -- and an enthusiastic supporter of George W. Bush in both of his gubernatorial runs, as well as his campaign for president.

Young also just happens to be the trial lawyer who has benefited most from the passage of the Texas Patient Protection Act of 1997, which afforded Texans the right to sue their HMO or health insurance company for medical treatment denied that resulted in adverse health effects, or loss of life. "I don't think [Bush] realizes when he starts attacking trial lawyers in terms of this legislation that he's attacking one of his strongest supporters," Young jokes.

But Young, who remembers how then-Gov. Bush fought the law tooth and nail in Texas, is hearing him make the same arguments as he fights its federal equivalent today, a patients' bill of rights offered by Sens. Ted Kennedy, D-Mass., John Edwards, D-N.C., and John McCain, R-Ariz., that has already passed the Senate -- despite Bush's veto threat -- and its House version, offered by Reps. Greg Ganske, R-Iowa, and John Dingell, D-Mich.

In 1997, he said of the Texas law: "I am concerned that this legislation has the potential to drive up healthcare costs and increase the number of lawsuits against doctors and other healthcare providers." Having vetoed a similar bill in 1995, Bush in 1997 did everything he could to sabotage the bill, to the point that two conservative Republican state senators complained on the floor of the state Senate about the various machinations of Bush's legislative aide, Vance McMahan. Eventually, faced with a veto-proof majority, Bush let the legislation become law without his signature. (That didn't keep him from trying to take credit for it during the third presidential debate last year.)

And last week, as the patients' bill of rights bill made its way toward debate in the House, Bush's concerns remained the same: "How best to improve the quality of care without unnecessarily running up the cost of medicine, without encouraging more lawsuits which will eventually cause people not to be able to have health insurance."

But since the 1997 Texas law that Bush opposed so strongly has taken hold, the disastrous effects he had predicted have yet to occur in the Lone Star State. In the four years since, even the law's opponents acknowledge that none of Bush's apocalyptic predictions came true.

Far from becoming a bonanza for avaricious trial lawyers, the right to sue an HMO or insurance company in Texas has been exercised just 17 times. Eleven of those lawsuits have been tried, to one degree or another, by Young. "It's been very beneficial," Young says. "We've seen the HMOs back down and be quicker to approve necessary care."

Young, of course, is a partisan on the topic. But when asked if there has been a rash of out-of-control lawsuits prompted by the law, Lee Jones, assistant director of the public information office for the Texas Department of Insurance, headed up by a Bush appointee, responds, "There hasn't been."

Texans for Quality Health Care, an association of business interests set up to fight the 1997 law and headed by Allan "Bud" Shivers Jr., a Bush Pioneer (a title given to a person who raised at least $100,000 for Bush's presidential campaign), no longer exists. But the group was housed by the Texas Association of Business/Chambers of Commerce, and Lara Laneri Keel, a spokeswoman for the group, maintains that "it's too soon to tell" if the 1997 law will create a flood of lawsuits, since none has yet to make it to jury trial (though the first case to be tried in the state, Brewer vs. Chang, was decided in favor of the HMO).

Keel, however, also points out that there is a "great deal of difference" between the Texas bill and the federal bills. The primary difference, she says, is that in the patients' bill of rights law that passed in the Senate, an employer can be sued if the business is the one directly making decisions about health insurance coverage.

Also significantly, the Texas law caps rewards for plaintiffs at $750,000 in punitive damages, and two times the amount of economic damages. Kennedy-McCain-Edwards caps the punitive damages at $5 million; the House version of the bill has no caps at all on punitive damages.

Keel argues that there has been one clear adverse effect of the 1997 law: "We do know that 18 percent of the small businesses in Texas have dropped their health insurance since the patient protections were enacted. The premiums have risen enough to put the cost of health insurance out of reach." A Hearst Newspaper analysis reported a decline in the number of employees of Texas small businesses who had insurance. But that decline was only slightly higher than the decline of employees in small businesses overall. In Texas businesses with 25 or fewer employees, the number of employees with insurance declined by 10 percent between 1997 and 1999 -- but the total number of workers in those firms declined by 8 percent. Similarly, in Texas businesses with 25 to 99 employees, those with health insurance declined by 9 percent in the same time period, while the number of workers in those firms decreased by 7 percent.

According to the Texas Department of Insurance, the number of Texans enrolled in health insurance or HMO plans has actually increased steadily since the 1997 law was passed. Enrollment has grown from 2,945,965 at the end of 1996, before the law was passed, to 3,204,998 at the end of 1997, to 3,938,259 at the end of 2000. And while the cost of HMO premiums has risen, it has increased at a rate lower than the national average.

Representatives from the Texas Association of Health Plans, which fought the 1997 law tooth and nail under the group's former name, the Texas HMO Association, did not return calls for comment.

While Texas HMO premiums have increased over the years, the 1997 Patient Protection Act was not really a factor in the increases, says the Department of Insurance's Jones. "Over a period close to four years, to have only 1,300 or so independent reviews is just not going to be that much of a cost-driver," he says. Larger factors in increased rates include the rising costs of prescription drugs and medical care.

Keel disagrees with this assessment, arguing that the Patient Protection Act was one of the factors leading to rising premiums. But HMO premiums in Texas have increased from $142.54 per member per month in 1996 to $154.21 in 2000, an increase of 8.1 percent in four years. Nationally, health insurance premiums increased 16.8 percent in just three years, from 1997 to 2000, according to the Kaiser Family Foundation.

One factor contributing to the seeming success of the Texas law has been the establishment of independent review organizations that consumers can submit complaints to before entering the legal system. Of the 3.9 million Texans enrolled in insurance plans, fewer than 1,400 have logged any sort of formal complaint or appeal against a decision by an HMO or insurance company.

Though not required to do so by law -- they could go right to court if they wanted -- most of those with a problem have sought redress through the independent review systems. From November 1997 through May 2001, independent review doctors have considered 1,349 complaints. In 672 of these assessments, or 50 percent, the independent review overturned the HMO or the insurance company's original ruling. In 567 cases, or 42 percent, the independent review upheld the HMO or insurance company's ruling. In 110 cases, or 8 percent, there was essentially a split decision.

Bearing all of this information in mind, Young, the lawyer, has difficulty comprehending how Bush can oppose the patients' bill of rights legislation offered in the Senate by Kennedy, Edwards and McCain, and in the House by Ganske and Dingell.

"I've tried to work with the White House and make them understand that their position is just dreadful," Young says. "Bush is just getting some bad advice." The rival patients' bill of rights Bush is supporting in the House, offered by Rep. Ernie Fletcher, R-Ky., "would effectively abolish the Texas statute," Young says. "Of the lawsuits filed under Texas law, none would meet the new hurdles that Fletcher creates to try to prevent people from pursuing litigation."

Kristin Stewart, director of private market issues for the American Association of Health Plans, which opposed both the 1997 Texas law and the Kennedy-McCain-Edwards bill, says that the two are "apples and oranges."

"The Texas liability law was interpreted very narrowly from the 5th Circuit Court decision," Stewart says. "The courts applied the law only to medical malpractice; it does not apply to coverage denials." Since 1974, HMOs have been shielded from state court lawsuits for decisions about coverage.

But the Texas law is new and still being tested, particularly on whether the law applies strictly to malpractice. In the first lawsuit filed under the 1997 law, Young represented the plaintiff, Kathy Plocica, in a case about a coverage decision. Plocica's husband, Joe, was denied inpatient psychiatric care in July 1999. A retired Fort Worth pharmacist, Joe Plocica had battled depression for much of his life, and was hospitalized after trying to kill himself in July 1998. But though Plocica was still threatening to kill himself, his insurance company -- NYLCare 65 and its mental health insurance contractor, Merit Behavioral Care Corp. -- refused to allow as many days for Plocica's stay as his psychiatrist recommended. After 13 days, Joe Plocica was sent home, and that evening after his wife fell asleep, he drank a half-gallon of antifreeze. He died eight days later.

"They have to be held accountable for what decisions they make," Kathy Plocica says. "Obviously in this case they made the wrong decision." Plocica says everybody should have the right to sue his HMO or insurance provider. "Maybe these insurance companies will be a little more cautious and not insist on sending people home before they're ready to be sent home." Plocica settled the case out of court for an undisclosed sum.

Erin Somers, a spokeswoman for Magellan Health Services (which purchased Merit Behavioral Care Corp. in February 1998), disputes that her company denied Plocica care, even though his attending physician agreed with the charge. "I'm aware of the attending physician's statement," Somers says. "I'm telling you that wasn't the case. We never denied payment for care for this gentleman. But it sounds like some of the facts that were presented to you are not how we understand this. There was never a denial." Somers says she was "governed by confidentiality regulations" and thus not able to explain why then her company then made a cash settlement with Kathy Plocica. She says she didn't know why the attending physician was under the impression that Merit was not willing to pay for any more additional days for Plocica at the psychiatric institution.

Young currently represents the plaintiffs in a few of these cases. In one, the severe heart defect of a 5-week-old Fort Worth infant, Morgan Carpenter, went unrecognized and untreated by a physician who Young is claiming was encouraged by his HMO, Harris Health Plan, to not refer patients to specialists so as to hold down costs. "We don't usually comment on any kind of pending or active litigation," said Tony Salters, a spokesman for PacifiCare of Texas, which acquired Harris Health Plan in February 2000.

PacifiCare faces another suit, currently in discovery, by members of Houston's Breihan family, who are suing PacifiCare of Texas for not authorizing surgery for a severe bedsore that they claim resulted in the death of their husband and father, William Breihan. "They denied the care that my father needed," says Meghan Breihan Beresford, daughter of the deceased. "They deemed it 'elective.' But he had a bedsore on his lower tailbone and buttocks that was bigger than the size of a dinner plate and so deep you could see his spine. It wasn't 'elective'; it wasn't like he was asking for a cosmetic nose job."

"I don't know the details about each of these 17 lawsuits," said the AAHP's Stewart when it was pointed out that many of these cases deal specifically with denials in coverage, not medical malpractice. "It will be up to the courts to decide whether each of these 17 cases goes forward."

Some of Young's cases have been dismissed based on the 1974 Employee Retirement Income Security Act, or ERISA -- the very law that patients' bill of rights supporters are trying to change -- which shields HMOs from state court lawsuits. A woman named Ruby Calad, denied additional hospital days after a hysterectomy, was told that she couldn't sue. And the case of Morgan Carpenter, the infant with the heart defect, was removed from court based on the ERISA preemption.

The Texas law is being tested on a case-by-case basis. Connie Blanchard hired Young to sue her HMO, Kaiser Foundation Health Plan of Texas, for creating financial incentives to encourage her physician to refrain from aggressive coverage, which resulted, she says, in a malignant melanoma that remained undiagnosed for too long. The case was settled out of court. Other cases -- the one dealing with the death of William Breihan, for instance -- are moving forward.

Young says that a national law is needed to solve the confusion created by ERISA -- why, for instance, government employees have the right to sue their health insurance providers in state court for coverage denied and private-sector employees don't.

"I'm still guardedly optimistic that if a good bill gets to Bush, he'll sign it," Young says. Asked if he would reconsider his support for Bush in 2004 if the president were to veto the Kennedy-McCain-Edwards bill, Young says that the appearance that Bush is beholden to corporate America would probably make the question "moot. It wouldn't matter whether I supported him or not because he'll be a one-term president the way things are going right now."

By Jake Tapper

Jake Tapper is the senior White House correspondent for ABC News.

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