Protecting the patient: how independent review could force HMOs to behave.

Matthew Cerniglia was dying. At the ripe old age of 12, the Sterling, Va., youth had been diagnosed with a rare form of cancer; it was already in its late stages and spreading rapidly. The standard treatment was 11 months of chemotherapy, but the side effects were so bad they literally were killing him. Matthew's only hope, his doctors said, was a quick burst of high-dose chemotherapy and a stem-cell transplant. Without it, he could pick his poison -- either the standard chemotherapy or the cancer would get him.

But HealthKeepers, Matthew's HMO, didn't see it that way. It's not a covered benefit, they said, and we can't start making exceptions now. Even after three appeals, right up to the HMO president, the answer was still no. The reasons changed. First they said that "although this procedure may be medically necessary; it is denied as a non-covered benefit of the plan." Later, they said it wasn't "medically necessary." The bottom line, HealthKeepers President Ellen C. Harrison wrote in the final denial, was that "this is purely a contractual issue."

So Matthew's father, Ray Cerniglia, went to his bosses at Mitretek Systems of McLean, Virginia. The company did an extraordinary thing: It set up a special fund at Fairfax Hospital for children with cancer and asked its employees to pitch in. With their donations and others, Cerniglia was able to get the treatment for his son. Today, Matthew is still on the mend, but his chances look a lot better than they used to. And, according to his father, the HMO still hasn't paid a dime for the treatment that may have saved his life.

It's horror stories like these that are the big guns in the fight to get Congress to pass a managed care reform bill this year. You hear a new story just about every day, whether it's the latest Capitol Hill press conference, the daily floor speeches by Senate Democrats, or the "Casualty of the Day" blast faxes one California consumer group is churning out. Not everyone has their own cancer story to tell, of course, and most people say they're happy with their own health plan. But there are some major warning signs: In a recent survey by the Henry J. Kaiser Family Foundation and Harvard University, 48 percent of Americans said they have had problems with their health plan or knew someone who has.

And if the stories about HMOs saying no to cancer patients on death's door are the extreme cases, consumer groups say they're not exactly rare either. "This isn't an isolated incident. We hear them every single day," said Terre McFillen Hall, whose Center for Patient Advocacy in McLean runs a hotline to advise patients on exactly these kinds of problems.

There are a lot of ideas on how to make managed care work better, but a basic issue is this: What do you do when your health plan says no? Managed care saves money by putting a check on the doctors and the patients so they don't run up outrageous bills. You don't want to give a CAT scan to everyone who comes in with a headache. But what do you do when it's the other extreme -- an HMO that says no to a bone marrow transplant for a dying cancer patient, or one that won't cover an emergency-room bill because you didn't call ahead while you were in the ambulance?

The biggest idea out there is also the one that's least likely to pass a Republican Congress. It would allow health plans to be sued for damages when they deny or delay coverage for a medical service and the result is an injured or dead patient. Right now, a lot of health plans are off the hook from those kinds of lawsuits thanks to a 1974 benefits law, the Employee Retirement Income Security Act (ERISA), that basically puts a whole class of health plans beyond the reach of state laws that could let you sue for damages. You can sue in federal court, but all you can get is the value of the benefit you were denied, which doesn't help you once the damage has been done.

This has led to a lot of sensational horror stories, but the proposed fix raises its own problems. For one thing, health insurance and business groups say it could lead to a flood of new lawsuits against benefits administrators. That puts the employers at risk just as much as the health plans -- and a lot of small businesses have said they'll drop their workers' coverage rather than face that. It also isn't the most popular proposal on the table; in the Kaiser/Harvard survey, people ranked the ability to sue health plans the lowest among the managed care reforms they wanted to see. But the bottom line is most Republicans just won't do anything that could lead to more lawsuits. Even with one of their own championing the cause (Rep. Charles Norwood of Georgia), this is the one idea they're fighting harder than anything else.

So let's fast-forward to the compromise. A lot of people in Congress think a stronger and faster appeals process, including the right to appeal to an outside party if you don't like the health plan's decision, would solve many of the problems before they get to the courts. The key is the so-called "external appeal," which would allow the patient to take a dispute to an independent reviewer and find out whether the health plan's decision was right. In other words, you get a second opinion. It's a more popular idea than the liability proposal, it's not expected to raise costs as much, and it would be an improvement over the appeal rights many patients have now.

This could be a big part of the compromise that ends the bitter debate we're seeing now. The health insurance industry and the business community, the same groups that squared off against the Clinton health care reform plan in 1994, are fighting just as hard to kill any managed care reform bill this year. They're not crazy about external appeals, but they're not fighting it as hard as liability. Several bills in Congress already call for it, and the Clinton administration is pushing for it. And the closer it gets to the election, the harder it is for Republicans to resist doing anything on managed care. There are plenty of last-minute, cosmetic fixes they could do to save face, but external appeals is one that actually could make a difference.

Outside Chance

It's hardly an untested idea. Everyone in Medicare, Medicaid, and the Federal Employees Health Benefits Program has some kind of external appeals available to them. That's 90 million Americans right there -- including members of Congress, who get their health care through FEHBP. (See "A Health Care Plan Most of Us Could Buy," April 1998.) And as of May, 17 states had laws or regulations extending the right to the rest of the consumers in those states. But 33 states aren't covered, and the laws aren't always strong in the ones that are. Until recently, for example, the Vermont law only covered mental health services.

What's more, ERISA could be a problem here too. The law keeps states from regulating the content of any self-insured or fully insured health plans, so it's not even a sure thing that people who get their health care through those plans could take advantage of the state appeal laws. Here's how Phyllis Borzi, an attorney and former congressional staffer who knows ERISA as well as anybody, answered that question at a recent conference: "The answer is, we don't know, and anybody who tells you they know, be suspicious of them" Great. That only covers, oh, 123 million people. These poor folks may have to take whatever rights ERISA gives them, and right now it doesn't give them external appeals.

There's no problem taking an appeal to the health plan itself. That's called an "internal appeal," and health insurance officials say it's pretty much an industry standard. A General Accounting Office study seems to bear that out. When it looked at the policies of 38 HMOs, it found that all had their own appeals processes, and even let patients appeal twice if they didn't like the first answer. If anything, a lot of people in HMOs don't know about the appeal rights they already have. That's not necessarily the HMOs' fault; according to the GAO, most described the appeals process clearly in their member handbooks or other literature, and most reminded people of their appeal rights when they sent out notices of denials.

The trouble is, these may be the same people who turned you down in the first place. "The plan denies the treatment, you appeal to the plan, the plan denies the treatment," says Judy Waxman of the consumer group Families USA. In the GAO study, only 15 HMOs specifically said the appeals must be decided by people who weren't involved in the first decision. That's why Consumers Union says the right to take 3,our problem to a neutral, outside party is "the linchpin for all other consumer protections" And no less a voice than the American Medical Association, in a recent statement to the Senate Labor and Human Resources Committee, warned that "the absence of independent review enables plans to make unfair and arbitrary decisions without any consequences"

So what do we know about these external appeals? For starters, we know from experience that they're not used very much. In Medicare, less than 1 percent of the claims in fiscal year 1997 were appealed; in Florida, state officials said they had an average of 350 external appeals a year between 1991 and 1995. That's a far cry from what people said in the Kaiser/Harvard survey, where 17 percent said they wanted to appeal to an independent reviewer when their health plan wouldn't cover a treatment. In reality, health analysts say, most people just don't go to the trouble.

But when they are used, the external appeals can make a difference. According to the GAO, 60 percent of the Florida appeals were decided in favor of the patients. And these weren't trivial issues -- they included emergency care and services the HMOs didn't think were "medically necessary" That phrase alone sums up much of what critics say is wrong with managed care. Linda Peeno, a former managed care medical reviewer, says plans often draw their definitions of "medically necessary" as narrowly as possible to save money, and that appeals to the plan don't do any good because they just use the same criteria they used to turn you down in the first place.

It's not always that simple, of course. Business groups say they need some discretion to say no to clearly unnecessary services, because without it you're back to the bad old days of exploding health costs. And some experimental treatments just flat out aren't safe. That's why Trigon Blue Cross Blue Shield, which runs the HealthKeepers HMOs, says it covers bone marrow transplants and other cancer treatments only if they have a solid record of safety and effectiveness. "We want to be able to do everything we can for our members, but we do require that there be a proven track record," says Trigon spokeswoman Brooke Taylor. But supporters of external appeals say they can help settle those questions too; some appeals have ended with the review board telling the patient, "Your doctor almost killed you."

If anything, the rare use of external appeals should make it a cheap fix. Because the appeals aren't likely to be used that much, Coopers & Lybrand figures a federal law would cost an average of 10 cents a person each month, while the Lewin Group says it would cost seven cents. That's well within the range of what the polls say people will accept. And while most people may not need it, supporters say, the ones who do can really use it. Just ask Matthew Cerniglia. "I firmly believe that if he had had an external appeal, he would have been okay," says Hall of the Center for Patient Advocacy.

Or you can ask Ronald J. Turner. His wife, Charlotte, had breast cancer, and by May 1993 it had metastasized. Her doctor in Massachusetts said she needed a procedure called an autologous bone marrow transplant, in which white blood cells would have been removed from her bone marrow, allowing her to undergo high-dose chemotherapy to kill the cancer, and then the white blood cells would have been returned to revive her immune system. But her HMO, Fallon Community Health Plan Inc., said no. Under the Fallon handbook, autologous bone marrow transplants weren't covered for solid tumors.

She appealed to the HMO, and Fallon agreed to change its policy -- but it would cover the procedure only under a particular transplant program that she didn't qualify for. She appealed to the plan again to cover her under a different program, but Fallon said no. In less than a year, Charlotte Turner was dead. Because of ERISA, Ronald Turner couldn't collect any damages, and that's why there's so much pressure for new liability for health plans. But the other side of the story is, the Turners never got to appeal to anyone outside of Fallon. If they had, perhaps the story would have had a different ending.

A Solution Everyone Can Live With

It's not hard to predict how the compromise might look. To avoid breaking the bank with tons of external appeals, there would be reasonable limits on the kinds of benefit decisions that could be appealed, a key concern voiced by the American Association of Health Plans. And patients would have to exhaust all of the internal appeals rather than going straight to the outside reviewers, a common safeguard in most of the state appeal laws. If you're dying, of course, you can't go through all that. So there'd be a super-quick appeals process for urgent cases, and if Norwood gets his way, there'd be something to make sure you don't have to get prior approval at all if it's really an emergency.

In return, the review panels would have to be truly independent, the main concern of Democrats and consumer groups. They say that's a weakness in some of the state laws that allow the health plans to pick the reviewers. Since the plans usually have to pay for the outside reviews, they say, the plans will just pick someone who always agrees with them. To keep the reviewers honest, either the state or the consumer has to pick them, or at least the consumer has to have the right to veto the health plan's choices, according to Adrienne Mitchem of Consumers Union.

This still leaves some big decisions. For one thing, whoever writes the compromise will have to decide what to do about these "contractual decisions," when the patient needs something and the plan contract says it isn't covered. If the reviewers can second-guess that decision, managed care officials say they'd have too much power; if they can't, they won't be able to help people like Matthew Cerniglia.

And for those who want to hold plans accountable for bad behavior, external appeals don't include any penalties. They haven't been tried in any of the existing programs, and congressional staffers say you can't really pull it off in an appeals process -- how do you prove a plan acted in bad faith? That's what the courts are for, they say. But legal liability for denying benefits, which the Clinton administration says would make plans less likely to stall and delay, isn't likely to make it into the compromise. So there's already talk of trying to include some other kind of penalties -- anything other than lawsuits. They don't have to be heavy-handed. One idea is just to let everyone know which health plans are getting into the most trouble so the businesses and consumers can go somewhere else. You'd have the states publicize all the figures on how many appeals each plan had and how many times they were overruled. Texas is already doing something like this; it's putting information on the Internet about the kinds of complaints it's getting about different HMOs and health insurers. That doesn't help people who can't afford computers, critics say, but it's a start.

It'll take a while to get the compromise. Right now, consumer groups think it would be a defeat not to get both external appeals and liability for health plans. The managed care industry and business groups don't want any legislation at all, and they're spending a lot of money to fight it. They say the problem has been overstated in any case; according to a survey of physicians published by the Blue Cross and Blue Shield Association, only about 3 percent of the medical services recommended by physicians ultimately are turned down. And when the problems do come up, the managed care and business officials say, they'll handle it voluntarily. Some companies, like GTE, are happily giving external appeals and other patient protections to their workers. They just don't want to be told to do it. "Things go wrong in health plans all the time. Things go wrong in hospitals. Things go wrong with physicians," said Karen Ignagni of the American Association of Health Plans at an April press conference. "But can we expect the federal government to solve each and every one of these issues?"

The answer is no -- and that's exactly why so many people in Congress like the external appeals idea; they say it doesn't give the feds that much to do. Congress has to step in to give everyone the right, of course. And states might certify the reviewers and possibly pick them, depending on whose proposal you like. After that, supporters say, the appeals ought to work pretty much on their own. "On the whole, it's pretty hands-off," says one Senate Democratic aide.

Most of all, supporters say external appeals will put the fear of God into managed care plans. The plans will be more likely to approve appropriate medical treatment, they say, because the decisions will have to stand up to an outside review. Consumers will be better off, the Lewin Group says, because they'll have more confidence that their health plans aren't just looking for the decision that will save the most money. And since a lot of health plans already offer external appeals, it shouldn't be a huge burden on the industry, says White House health policy adviser Chris Jennings. Instead, he says, "it will give consumers more confidence in their health care plans, which will benefit not only the public, but the managed care industry itself."

Ray Cerniglia just wants something to happen. All he has right now, he says, is a one-sided appeals process where the health plan calls all the shots and "the appeal is to determine whether it's covered in the contract, not what's best for patients" If there's a way to win the public's confidence back for 10 cents a month, and it can keep the federal government at arm's length, that might start looking pretty good to Congress. Did we mention it's an election year?

DAVID NATHER is a health reporter 35r the Bureau of National Affairs Inc., a public policy news and information publisher in Washington, D.C.