Professional Point

There has been much federal legislative activity so far this session concerning managed-care reform, and the White House has shown that it wants to get in on the action. Of course, no amount of political activity guarantees that, at the end of the day, a strong patient protection bill will become law. As in the last few years, the right of patients to sue negligent managed-care companies remains at the heart of the policy battle and the key to successful reform.

Almost immediately after the 107th Congress was seated, Sens. John McCain (R­Ariz.), Edward Kennedy (D­Mass.) and John Edwards (D­N.C.) introduced a patient protection bill with an HMO (managed-care company) accountability or "right to sue" provision. In the House, Reps. Greg Ganske (R­Iowa) and John Dingell (D­Mich.) introduced companion legislation. While the accountability language in these bills was a variation of language previously included in the Norwood-Dingell bill, it was clearly the strongest proposal ever put forward in the Senate, which, in contrast to the House, has been slow to embrace patients' right to sue.

Increased accountability

In a nutshell, the McCain-Ganske bill provides for lawsuits in both federal and state courts. If enacted, the bill would create a new federal cause of action against managed-care plans for inappropriate decision making related to such issues as enrollment or plan coverage. In essence, these new causes of action would cover the types of decisions presently covered by ERISA actions. But unlike ERISA actions, which currently only allow recovery for the economic value of the denied benefit, the proposed new federal action includes unlimited economic and non-economic damages. In addition, the bill creates a new civil assessment of up to $5 million if it can be shown that the managed-care plan displayed "bad faith" in its administrative decision making.

At the state level, the bill ends ERISA preemption of state-based personal injury or wrongful death causes of action for managed-care decisions that involve medical judgment, i.e., "medically reviewable decisions." Negligent medical necessity or utilization review decisions are examples of the types of actions by managed-care plans that could be legally challenged if this bill were to become law. Managed care's present immunity to challenge for many such actions due to ERISA preemption has been a major obstacle to holding managed-care companies accountable. The bill leaves it to state law to determine allowable economic and non-economic damages. Punitive damages also would be available where a plaintiff could show that the managed-care plan acted with "willful or wanton disregard" for the rights or safety of others. Importantly, the bill includes damages for mental injury (as well as physical injury), something that other proposals have, unbelievably, omitted.


While many in Congress support strong patient protection with an adequate right to sue, not everyone favors it. Sens. Bill Frist (R­Tenn.), James Jeffords (I­Vt.), and John Breaux (D­La.) are introducing legislation that limits patients' right to sue. The Practice Directorate succeeded, along with other mental health organizations, in making sure that the definition of injury contained in this bill includes "significant mental illness or disease," not just physical injury. Yet under the Frist-Jeffords-Breaux bill, patients could only sue for denials of care in federal court (no state cause of action) for unlimited economic damages plus up to $500,000 for non-economic damages adjusted for inflation, and patients would be barred from seeking any punitive damages. While the Frist-Jeffords-Breaux bill includes most of the patient protections included in McCain-Kennedy apart from the right to sue, it is clearly intended as a more conservative counterproposal to holding managed-care companies more fully accountable. Congressman Charlie Norwood (R­Ga.), longtime champion of a patient's right to sue, describes the liability section of the Frist-Jeffords-Breaux legislation as fatally flawed, with legal loopholes and hurdles that will prevent most victims from being able to successfully file suit.

It would seem, then, that the stage is set for a political battle through the spring (and perhaps into the summer) over a patient's right to sue a negligent managed-care company. Any real reform of the current market-driven managed-care approach to health care depends on the degree to which managed-care plans are held accountable for profit-driven corner-cutting. Some bills in play would hold managed-care companies accountable; other bills would not. Attempts at patient protection without sufficient means of enforcement risk creating a "fig leaf" statute that adds little to legal reform that is simultaneously occurring in the courts, albeit slowly, as the common law whittles away at ERISA preemption. In the end, however, the courts will not be able to fashion a complete fix on their own. A strong right to sue law passed by Congress is also necessary.