[Extensions of Remarks]
[Pages E1352-E1354]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

TESTIMONY OF PETE STARK

______

HON. FORTNEY PETE STARK

of california

in the house of representatives

Thursday, June 26, 1997

Mr. STARK. Mr. Speaker, I would like to submit for the ='04'>Record
recent testimony I presented to President Clinton's Advisory Commission
on Consumer Protections and Quality in the Health Care Industry. The
need for consumer protections in managed care is great--I urge my
colleagues to pass legislation to protect the millions of patients in
managed care plans:

Testimony of Congressman Pete Stark Before the Advisory Commission on
Consumer Protection and Quality in the Health Care Industry

Secretary Shalala, Secretary Herman, and Members of the
Commission: Thank you for this opportunity to present
testimony concerning critically needed consumer protections
for the millions of Americans in managed care plans.

Background

Health care consumers who entrust their lives to managed
care plans have consistently found that many plans are more
interested in profits than in providing appropriate care. In
the process of containing costs patients are often harmed. My
constituent mail has been full of horror stories explaining
the abuses that occur at the hands of HMOs and other forms of
managed care.

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For example, David Ching of Fremont, California had a
positive experience in a Kaiser Permanente plan and then
joined an employer sponsored HMO expecting similar service.
He soon learned that some plans would rather let patients die
than authorize appropriate treatment. His wife developed
colon cancer, but went undiagnosed for 3 months after the
first symptoms. Her physician refused to make the appropriate
specialist referral because of financial incentives and could
not discuss proper treatment because of the health plan's
policy. Mrs. Ching is now dead.
This tragedy and others like it might have been avoided if
the patient had known about the financial incentives not to
treat, or if the physicians had not been gagged from
discussing treatment options, or if there had been
legislation forcing health plans to provide timely grievance
procedures and timely access to care. It is too late for some
victims, but it is not too late to provide these protections
for the millions of people in managed care today.
A few years ago, Congress recognized a crisis in the health
care industry. Expenditures were soaring and overutilization
was the rule. At that time, I chose to address this problem
with laws that prohibited physicians from making unnecessary
referrals to health organizations or services that they
owned.
Others responded by pushing Americans into new managed care
plans that switched the financial incentives from a system
that overserves to a system that underserves. They got what
they asked for. The current system rewards the most
irresponsible plans with huge profits, outrageous executive
salaries, and a license to escape accountability.
Unfortunately, patients are dying unnecessarily in the wake
of this health care delivery revolution. It must stop.
Several states have already addressed the managed care
crisis. In 1996, more than 1,000 pieces of managed care
legislation flooded state legislatures. As a result, HMO
regulations were passed in 33 states addressing issues like
coverage of emergency services, utilization review, post-
delivery care and information disclosure. Unfortunately, many
states did not pass these needed safeguards resulting in a
piecemeal web of protections that lacks continuity. The
states have spoken; now it is time for federal legislation to
finish the job and provide consumer protections to all
Americans in managed care.

H.R. 337--The Managed Care Consumer Protection Act of 1997

I have introduced a bill--H.R. 337--The Managed Care
Consumer Protection Act of 1997 which includes a
comprehensive set of protections that will force managed care
plans to be accountable to all of their patients and to
provide the standard of care they deserve.
This legislation includes measures to protect patients from
the abuses of managed care on several fronts. One particular
provision in the bill would require the managed care plan to
at least see the patient and perform some form of preventive
health screening before the Federal government pays the
monthly capitated dollar amount. We should not continue to
pay plans a monthly fee when many times, the plan has never
seen the beneficiary face-to-face. If one of the goals of
managed care is to focus on preventive care, the patient
must--at the very least--first be seen by the managed care
plan.
I am pleased that many of the provisions in my bill were
included in the recent Medicare proposals in both the Ways
and Means and the Commerce Committees. I have attached a
summary of the bill for your review.
Many Members testifying today have introduced legislation
with similar provisions. In that light, I will focus on only
a few issues.

A Plea to Revisit the Physician Financial Incentive Issue

I am the author of the law limiting physician financial
incentives to withhold care. I am very disappointed in the
regulation implementing this law.
The regulation allows a plan to place a doctor 25 percent
at risk.
How many of you flew here on an airline that gave 25
percent bonuses to its airplane mechanics NOT to spend too
much time checking the plane's safety? Good luck going home.
What is particularly disappointing about the 25 percent
figure is that there is some data that the industry average
is closer to 19 percent. The 25 percent figure should be
lowered. I urge you to recommend that it be phased down over
a period of years to a level where the average patient would
not be offended or suspicious.
If you think the 25 percent figure is okay and won't change
behavior in strange ways, I refer you to a Wall Street
Journal article of two weeks ago, which talked about doctors
selling Amway products to their patients to make extra money
on the side. The doctor featured in the article had seen his
income from $400,000 a year to $300,000, so he was selling
soap to everyone in sight. Think about it.

Need to Reform Government Oversight Structure

HCFA has an impossible task: to promote managed care and at
the same time to try to regulate it on behalf of consumers.
The two missions are inconsistent: you can't do both well.
Note the current controversy over the Grijalva case, where
HCFA has come down on the side of the HMO companies, much to
the anger of every consumer group in the nation.
We need a new structure of governance as managed care
grows.
I urge the Commission to recommend a restructuring of
government to address this problem. Let HCFA be the promoter
and payer of managed care plans. That is certainly their
bureaucratic culture and history.
For the public and the consumer, we need a new, independent
consumer commission that will make coverage, consumer appeals
and grievance, and quality measurement decisions. I recommend
to you the SEC-type model suggested in several books and
articles by Professor Marc Rodwin of Indiana University. This
Commission should be composed of consumers and must be
structured so it is never captured by the industry.
We need an independent consumer commission now. We will
need it more each passing day. I do not believe that HCFA has
yet made Medicare coverage decisions on the basis of cost to
the program. But as the Baby Boom generation retires and the
financial pressures on the program become more intense, will
people be able to trust their government to make medically
honest coverage decisions? Will HCFA become a rationing
system that controls costs but may not be good for our
health? Various right-to-life groups are already questioning
the program. An independent consumer commission that would
address coverage issues would prevent this government
rationing issue from becoming a future divisive issue in our
aging society.
A wise industry would support such a Commission: it is
their only hope to show the public that there is an
independent, honest ombudsmen whom families can turn to in
matters of life and death concerning health care. The managed
care industry is facing a weekly drumbeat of ridicule in the
one place that truly has the pulse of the American public--
the nation's comic strips and political cartoons. The last
page of my testimony attaches two cartoons from just the
Washington Post of the last week. What would it be worth to
the HMO industry for these cartoons to go away? They will go
away when the public no longer things they are funny and when
they no longer resonate. An independent, pro-consumer
Commission is the single best answer to ending the ridicule
and bad press.

The impending crisis in rural managed care

I urge the Commission to take a special look at what I
believe is an impending crisis in rural health care.
In the Medicare Reconciliation bill, Congress is preparing
to place a very high floor on payments to managed care plans
in rural counties--a floor far above their cost of serving
the beneficiaries who live in those communities. At the same
time, we are making it easy for local doctors and hospitals
to form Provider Sponsored Organizations or ``baby HMOs''
that serve as few as 500 enrollees. PSOs in rural America,
where there is already a shortage of providers, will
certainly look like monopolies.
The combination of the high managed care payments and the
new PSOs will work to force most rural Americans into brand
new HMO-type organizations. The good news is that the payment
floors will be so high that (if the ACRs are calculated
honestly) rural Americans will be offered a wide range of
extra benefits. The bad news is that it may be hard for rural
Americans to get referrals to urban or out-of-area providers
who can provide better quality care than their local rural
PSO.
I believe we will need some special measurements of these
new rural PSOs to ensure that we are not trapping millions of
rural residents in monopolistic low-quality plans.

Managed Care and Anti-Fraud

The HHS Inspector General, in cooperation with the GAO, has
undertaken a system-wide audit of Medicare. Their report will
be issued in about three weeks.
According to press reports, they will find that in fee-for-
service Medicare last year we lost about $23 billion to
fraud, waste, and abuse. Over five years that would be about
$115 billion--the exact size of the Medicare Budget cuts the
House passed yesterday.
Some will say that this proves we need to move faster to
managed care. I submit there is substantial fraud in managed
care as well. I urge the Commission to encourage HCFA to do a
better job of rooting out managed care fraud.
There is the fraud of under-service and denial of care--the
fraud that can kill.
There is the fraud of the Adjusted Community Rates (ACR)
that companies tell us equal the cost of serving their
commercial business. Time after time an HMO does not provide
extra benefits and says that its ACR does not require such
extra benefits. Then when a second or third managed care plan
enters the market, all of a sudden the plan finds that it can
offer zero premiums, drug benefits, and eyeglasses. On its
face, the plan that for years offered no or few extra
benefits was committing a type of fraud.
I've attached an exchange of correspondence with the OIG
that makes the point that if fee-for-service Medicare has a
10 to 14 percent fraud, waste, and abuse factor built into
its rates, we certainly should not base managed care payment
rates on that fraudulent, inflated base. It is a mathematical
fact that the payment rate to HMOs should be less than 90
percent of the current fee-for-service rate--unless you want
to pay twice for fraud.

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Thank you for this opportunity to present my ideas about
much needed consumer protections in managed care.

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