New Survey Offers Insight Into Experiences of Managed Care Consumers

Majority of Sacramento Managed Care Consumers Report No Difficulty with Their Plan, But Over a Quarter Had Problems

For Immediate Release:Wednesday, November 19, 1997

Contacts:Heather Balas,Kaiser Family Foundation, (650) 854-9400

Katie Salvas,Sierra Health Foundation, (916) 922-4755

Magdalena Beltran-del Omo,The California Wellness Foundation, (818) 589-6600

Lauren Schaefer,Health Rights Hotline, (916) 551-2147

Medicaid Beneficiaries Report Highest Rate of Difficulty

Sacramento, California — Much national attention is currently focused on managed care issues, with a Presidential advisory commission considering a “bill of rights” for health care consumers and California policy-makers awaiting recommendations from a managed care task force. A new Survey of Consumer Experiences With Managed Care conducted in the Sacramento, California area – a region with one of the highest rates of managed care enrollment in the country – may help inform state and national debates about managed care regulation, offering new insight into difficulties people have with health plans and how they go about resolving them.

The survey finds that the majority of Sacramento managed care consumers cited no difficulties with their health insurance in the previous year, but that more than a quarter (27%) reported some problems. Of those managed care consumers experiencing problems, the most commonly reported difficulties included:

• Delay or denial of care or payment (42%), such as disputes over coverage, delays or denials in authorization for care, and disagreement over the scope of benefits covered by the plan.
• Limited access to physicians (32%), such as difficulty getting an appointment or limited access to specialists.
• Concerns about quality of care (11%), including perceived problems with inappropriate or inadequate treatment, facilities, or diagnoses, or with obtaining test results.

The report found that consumers did not appear to know of the availability of existing resources, particularly from state agencies. Of the 1,014 managed care consumers in the survey who reported difficulties – of whom many had major problems unresolved after over two months – only four individuals reported calling either the California Departments of Corporations or Insurance for assistance or to complain. A total of 2% of consumers with difficulties contacted any state or local agency.

Thirty-eight percent contacted their health plan and 37% contacted their doctor, while a quarter took no action. (32% used two or more resources.) Of those who took no action, 26% didn’t think it would do any good, 24% thought it was not worth the time, and 14% did not know what to do.

About the same number of consumers resolved their difficulty relatively quickly as those whose problem took two months or longer to settle. Over a third of consumers (36%) resolved their difficulty in less than a month, while 13% achieved resolution in one to two months. Another 13% took two months or longer to resolve their problem, and 35% had not resolved their problem at the time of the interviews. (Almost three-fourths of unresolved problems were at least two months old.)

The survey was conducted to provide baseline information for a multi-year evaluation of a pilot consumer assistance program, the Health Rights Hotline, funded by the Kaiser Family Foundation, Sierra Health Foundation, and The California Wellness Foundation with initial support of $1.6 million for the first two years of the project. The program is the largest test of an independent assistance program for consumers in managed care in the nation. Over the next three years, additional data on cases handled by the Health Rights Hotline and a full-scale evaluation of its effectiveness will be conducted.

Len McCandliss, president of Sierra Health Foundation, said, “With over 90% of privately insured Sacramentans enrolled in managed care, the community has long been considered an HMO ‘laboratory.’ We believe that very soon practically every community in the nation will resemble Sacramento in terms of managed care prevalence.”

Medicaid and Medicare

Low-income people enrolled in managed care through Medicaid (called Medi-Cal in California) experienced the highest rate of difficulty (42%). People insured through Medicare managed care (who account for 45% of all elderly and disabled Medicare beneficiaries in Sacramento county) experienced the lowest rate of difficulty (17%).

Reported Consequences of Difficulties

To provide information about the severity of the difficulties consumers experienced, the survey asked people several questions about the consequences they attributed to their difficulties (as opposed to the consequences of any underlying health condition). Of the 27% of people who reported a difficulty with their health plans:

• 30% attributed a personal financial loss to the difficulty, including 12% who reported a financial loss of greater than $200.
• 31% attributed time lost from work, school, or other major activity to the difficulty, including 16% who reported losing two days or more.
• About one in ten (11%) reported experiencing a worsening of a health condition or developing a new condition as a result of the difficulty.

“Quality health care has to work for patients,” said Gary Yates, president and CEO of The California Wellness Foundation. “These results show that while the majority of consumers reported no problems with their care, we must strive to make the system work for everyone. We see that even consumers with long-term continuity and familiarity with managed care have experienced difficulties.”

Consumer services

Most consumers said they would have used the services of an independent group to resolve their difficulty, had the option been available. The most popular requests were: a mechanism for lodging a complaint to prevent future problems for others (66%); information about consumer rights (62%); referral to other resources (60%); and assistance in understanding their health plan’s policies and procedures (54%).

“At a time when people across the country are complaining about managed care, this project is trying to find solutions,” said Drew Altman, president of the Kaiser Family Foundation, referring to the Health Rights Hotline. “It is the leading community-based effort in the nation giving people concrete help for their health plan problems.”

Methodology

The Survey of Consumer Experiences in Managed Care was developed and analyzed by the Lewin Group of Fairfax, Virginia. The survey was administered by Survey Methods Group, Inc., of San Francisco, California. Screening interviews were conducted in June and August, 1997 with representatives from 4,419 Sacramento households contacted at random by phone. Of these 3,768 were managed care consumers, upon whom survey results were based. For Medicare and Medicaid beneficiaries, managed care enrolles were identified based on the names of their plans. Since traditional fee-for-service coverage is virtually non-existent in the Sacramento area, all privately insured people were categorized as being in managed care. The margin of error is +/- 3% for most questions. These findings are preliminary; a final report will be released at a later date.

Additional information, including a complete copy of this preliminary report, can be obtained by calling the Kaiser Family Foundation’s toll-free publication request line at 800-656-4533 and requesting document #1344.

The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, independent national health care philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. Sierra Health Foundation, located in Sacramento, supports health and health-related activities in Northern California. Based in Woodland Hills, The California Wellness Foundation’s mission is to improve the health and wellness of the people of California.

Health Rights Hotline

The Survey of Consumer Experiences in Managed Care was conducted as part of a broader program to support and evaluate the Health Rights Hotline, a free, independent source of information and assistance for health care consumers in California’s El Dorado, Placer, Sacramento, and Yolo counties. The Health Rights Hotline, which began providing services in June 1997, is the first program of its kind in the nation to assist consumers regardless of the type of health plan they have and regardless who pays for care – whether an employer, individual, Medicare, Medi-Cal, or CHAMPUS. The Health Rights Hotline – a program of the Center for Health Care Rights in Los Angeles – is funded for a four-year pilot period to:

• improve consumers’ access to health care by educating and assisting them to be responsible, informed, and empowered;
• improve the health care system in the four-county Sacramento area by collecting and analyzing information on the types of issues consumers face, and providing feedback to health plans, health care providers, purchasers, regulators, and the public regarding consumers’ experiences; and
• test this program as a model for other consumer-oriented programs in California and the nation.

“The survey results point to the role that independent consumer assistance organizations like the Health Rights Hotline can play in helping consumers navigate an often confusing system,” noted Peter Lee, Health Rights Hotline Project Director.

The Health Rights Hotline is open 9 a.m. to 6 p.m., and can be reached toll-free by consumers in the four-county service area at (888) 354-4474 or (916) 551-2100.

Medicaid Expenditures and Beneficiaries: 1994 Update

October 1998

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Medicaid Expenditures and Beneficiaries:Policy Brief Tables Chart Pack

A survey of Americans’ attitudes toward managed care, including comparisons between consumers in managed care versus those in traditional fee-for-service plans. The survey was designed and analyzed by researchers at the Kaiser Family Foundation and Harvard University and conducted by telephone by Princeton Survey Research Associates with 1,204 adults nationwide between August 22 and September 23,1997. A sample of 500 adults in California and 500 adults in Massachusetts were also surveyed. The toplines for California (#1326), and Massachusetts (#1327) are available separately.

• Report: The Development of Capitation Rates under Medicaid Managed Care Programs: A Pilot Study

An Annotated Bibliography of Sentinel Articles

• Report:

Medicaid Facts: Medicaid’s Role for Children

This fact sheet provides an overview of children’s eligibility and coverage under Medicaid, summarizes Mediciad benefits and expenditures for children, and highlights key issues facing the program as it continues to serve children.

• Fact Sheet
• Fact Sheet

In 1995, 17.5 million children — one-quarter of all children under age 18 — had Medicaid coverage for health care services. Medicaid, the federal/state health program for the poor, pays for a broad range of services for children including well-child care, immunizations, prescription drugs, doctor visits, and hospitalization, and a range of long-term care services for children with disabilities.

Medicaid plays a particularly strong role for low-income children, covering two-thirds (64%) of all poor children and a quarter( 27%) of children with incomes between 100% and 199% of the federal poverty level (FPL). While employer-based insurance coverage of children declined from 1987 to 1995, expansions in Medicaid have resulted in greater coverage of children in low-income families (Figure 1). During this same period, Medicaid enrollment grew from about 10 million — 15.5% of all children — to 17.5 million children (23.2%).

Despite the importance of Medicaid today, about 10 million children are uninsured. Lack of insurance is particularly high among low-income children. Seventy percent of uninsured children are in families with incomes below 200% of poverty. The new State Child Health Insurance Program, enacted as part of the Balanced Budget Act of 1997, is intended to provide coverage to this group.

Eligibility

Being poor does not automatically qualify a child for Medicaid. In the past 15 years, Medicaid eligibility for children has been broadened considerably through federal legislation and state optional expansions. Prior to 1986, Medicaid primarily served children who received AFDC cash assistance. Today, children qualify for Medicaid based on their age and income.

Medicaid coverage is especially prominent among young children, covering 33% of infants and 29% of children ages 1 to 5. Because recent expansions focused on young children, older children are less likely to qualify for Medicaid. Medicaid covers 22% of children between the ages of 6 to 12 years and 17% of teens between the ages of 13 to 18 years.

Medicaid Coverage of Children:

States are mandated to cover certain groups of children based on age and income criteria. By 2002, all states will be required to have phased-in coverage of children under age 19 with incomes below poverty. States can choose to expand Medicaid eligibility beyond federal minimum standards by raising age and income levels for children (Figure 2). They can also use Section 1115 research and demonstration waivers to broaden eligibility. In total, 41 states have expanded Medicaid coverage to children in one or more age or income levels. Federal coverage requirements for children are as follows:

• Up to age 6 with family incomes up to 133% FPL. For infants, 35 states have chosen to expand coverage beyond 133% FPL and 13 have expanded for children age one to six.

• Age 6 to 14 with family incomes below 100% FPL. Fifteen states have opted to expand eligibility beyond 100% FPL.
• Age 15 to 19 if family income meets the AFDC criteria of August 1996 (state average is 41% of FPL) with coverage phased-in for poor children born before 9/30/83. 25 states have opted to accelerate this phase-in to cover older children up to age 18 with income below 100% FPL (Figure 2).
• Children with disabilities also qualify for Medicaid assistance on the basis of SSI eligibility. Medicaid covers about 1 million additional children with physical or mental disabilities.

Because states established varied Medicaid income eligibility levels for children, and because of state variations in per capita income there is considerable variation in Medicaid coverage, ranging from 13% of children in Colorado to 47% in West Virginia. Similarly, Medicaid pays for 39% of all births nationally, but coverage varies from 21% of births in Massachusetts to 61% in Georgia.

The Balanced Budget Act (BBA) of 1997 creates new options for states to strengthen and expand Medicaid coverage for children. The new State Children’s Health Insurance Program (CHIP) was enacted as part of the Balanced Budget Act (BBA) of 1997. This new capped federal program allocates $20.3 billion over five years in the form of a matched grant to states to expand coverage to uninsured low-income children through either a separate state program or by broadening Medicaid — or both. The funds became available on October 1, 1997 and are targeted to uninsured children under 19 with income below 200% of poverty who are not eligible for Medicaid or not covered by private insurance.

Provisions of the Balance Budget Act also included some important changes to Medicaid. It clarifies the state Medicaid option to accelerate the phase-in for children born before September 30, 1983. In addition, the new law gives states the option to extend presumptive eligibility to children, meaning that services provided to low-income uninsured children will be covered by Medicaid before the Medicaid eligibility determination process is complete. States can also offer 12 month continuous eligibility to children, regardless of any changes in family income during that period.

Services and Costs

Federal guidelines require that Medicaid cover a comprehensive set of services with nominal or no cost-sharing for children. Access to these services is important because poor children experience more health problems than more affluent children. Children with Medicaid are eligible to receive physician and outpatient services, prescription drugs, inpatient hospital care, and long-term care services.

Medicaid coverage also entitles children to early and periodic screening, diagnostic, and treatment (EPSDT) services including a comprehensive health and developmental history and physical exam, immunizations, laboratory tests including blood lead levels, and health education. Children found to have conditions requiring further attention are covered for needed treatment.

The importance of health insurance in securing access to health care services is well documented. Despite their complex health and social needs, children with Medicaid coverage have access to care that is similar to higher income privately insured children (Figure 3).

In 1995, Medicaid spent $25.4 billion on health care services for 17.5 million children in low-income families and about $7.1 billion for one million disabled children. The majority (93%) of the expenditures for non-disabled children are for acute care services, with one third for inpatient hospital care.

While low-income children represent half of the 35 million Medicaid beneficiaries, they account for only 16.7% of overall Medicaid spending. In 1995, Medicaid spent an average of $1,175 per low-income child enrolled in the program. On average, children cost less to care for than older Medicaid beneficiaries, but some disabled children have very costly health and long-term care needs. Medicaid spent an average of $6,421 per year per child qualifying on the basis of disability (Figure 4).

Issues and Challenges

Expanding Coverage.

To broaden coverage of low-income uninsured children, Congress enacted the new State Child Health Insurance Program and included provisions to allow states to facilitate enrollment and continuity of coverage under Medicaid. Key issues facing state Medicaid agencies include how the new children’s program will be structured, financed, and implemented, as well as how it will be integrated with or build on the state’s existing Medicaid program.

Participation.

An estimated 3 million of the 9.8 million uninsured children are eligible for but not enrolled in Medicaid. This is largely due to enrollment barriers or lack of awareness of the program. States can streamline the eligibility process and facilitate enrollment. For example, 25 states allow mail-in eligibility applications and 29 states have dropped the asset test. Medicaid eligibility policy has also changed markedly as a result of the 1996 welfare law, which eliminated the automatic link between cash assistance and Medicaid. Ongoing and intensified outreach and educational efforts will be necessary to assure that all the children who are eligible for assistance under Medicaid are enrolled.

Managed Care.

In 1996, 40% of beneficiaries were enrolled in managed care, mostly low-income children and their parents. The BBA of 1997 expands state flexibility by allowing states to mandate Medicaid managed care enrollment without requiring states to obtain a Section 1115 or 1915(b) waiver. States will still need a waiver to mandatorily enroll special needs children, but will be able to enroll other non-disabled children. Managed care has the potential to improve access to preventive and primary care, but given the vulnerable nature of the Medicaid population, it requires careful implementation and monitoring to assure quality and access.

The November/December 1997 edition of the Kaiser Family Foundation/Harvard Health News Index includes questions about major health issues covered by news media, including questions about AIDS and the Health Care Bill of Rights. The survey was based on a national random sample of 1,201 Americans conducted December 4-9, 1997 which measures public knowledge of health stories covered in the news media the previous month. The Health News Index is designed to help the news media and people in the health field gain a better understanding of which health stories in the news Americans are following and what they understand about those health issues. Every two months, Kaiser/Harvard issues a new index report.

Note: This publication is not available on our website. However, the data from these surveys is still available through the Public Opinion and Media Research Group. Please email kaiserpolls@kff.org for more information.

Managed Care Plan Liability: An Analysis Of Texas And Missouri Legislation

Patricia A. Butler, JD, DrPH

November 1997

Background

As increasing numbers of Americans receive health care coverage through managed care plans, public attention has been focused on some of the problems consumers have with such plans. Although most consumers report satisfaction with their plans, some express concern that plans’ financial incentives limit access to needed services. For example, some consumers are not referred to specialists, some needed specialists are not part of managed care plan networks, and some chronically ill people must seek a referral from a primary care physician even though a specialist is more appropriate to manage their care. The prevalence of these problems is unknown, but they are taken seriously by state and federal policy makers who see a solution in the courts. By allowing plan participants to sue their health plans, as they can currently sue their physicians, lawmakers hope managed care plans will become more responsive to consumers. Health plans, on the other hand, oppose such laws on the belief they will drive up costs. Two states, Texas and Missouri, recently passed legislation permitting managed care plan participants to sue plans when they are injured by a denial of health coverage.

Current Health Care Liability Laws and Proposals

Current laws in most states generally permit consumers to sue managed care plans for actions that injure them. However, in many states, managed care plans can effectively avoid such lawsuits under “corporate practice of medicine” laws, which prohibit organizations not owned by physicians from employing physicians. These laws have been interpreted by many courts as barring suits against HMOs and other health plans on the ground that HMOs and other corporations cannot be sued for medical malpractice if they are prohibited from “practicing medicine.”

The new Missouri and Texas laws both eliminate this defense to a suit against managed care plans, but Texas goes further in two important ways:

• First, the Texas law creates an explicit new legal claim that managed care plan participants may use as the basis of a lawsuit: the assertion that a plan failed to use “ordinary care” in denying or delaying payment for care recommended by a physician or other provider. The result of the Texas law is similar to court decisions in other states, but Texas is the first state to define a specific standard of liability for managed care plan decisions in legislation.
• Second, the Texas law creates “independent review organizations” to which managed care plan enrollees can appeal disputes over plan coverage.

Missouri’s new law removes the corporate practice of medicine defense to suits against health plans but does not create an explicit claim, leaving it to the state’s courts to decide what kinds of plan misconduct may result in liability.

Proposals to expand or clarify the liability of managed care plans have been considered in several other states, such as California and New York. Federal liability legislation has also been introduced, for example, in bills sponsored by Representative Norwood, Senator D’Amato, and Representative Stark.

Objectives of Texas and Missouri Laws

Both the Missouri and Texas managed care plan liability laws are part of comprehensive initiatives to regulate managed care plans, and both were developed through the work of bipartisan interim legislative committees. An alliance of state medical societies and consumer groups in each state supported the liability legislation to achieve several objectives:

• Health plan accountability. Sponsors and supporters in both states asserted that managed care plans’ decisions to deny or delay coverage influence physicians’ willingness to provide treatment. When these decisions injure plan participants, plans should be held accountable.
• Equitable treatment. Bill supporters saw no justification for treating managed care plans differently from other businesses, which can be held responsible for conduct that injures customers.
• Injury prevention as well as compensation. Supporters hope that the threat of litigation can encourage more appropriate managed care decisions about what is “medically necessary.” The new external review procedure in Texas was also intended to avoid litigation and provide quicker resolution of participant disputes with their plans.
• Consistency with tort reform. Legislators who had supported previous state tort reforms (e.g., limits on jury awards, attorneys’ fees, and time to file lawsuits) felt it appropriate to impose responsibility proportionate to the actual conduct of organizations and individuals. Consequently, they argued that health plans should be held responsible for decisions that affect physicians’ medical care decisions.

These bills were opposed in both states by health insurers and managed care plans, as well as some business representatives, who raised several concerns about liability expansion. For example, bill opponents argued that managed care plan premiums would increase substantially because the threat of liability would force plans to cover inappropriate care and because of the potential that juries might make large financial awards because they view managed care plans as having “deep pockets.” Without cost studies to support these estimates, however, this argument was not persuasive. Health plans in both states also asserted that plan participants can already sue under various legal theories, although court opinions in both states seemed to limit the rights of plan participants to sue their plans.

Despite the opposition of powerful insurance and business organizations, liability laws passed in Texas and Missouri due to an apparent combination of compelling public interest in the issue and political forces. The initiatives were bipartisan, sponsored by highly respected legislators, and supported by a unique coalition of provider and consumer groups. Perhaps most important, through hearings held by interim study committees and legislative committees in both states during the regular session, legislators learned the deep public frustration with managed care plans, which they believed required action.

Policy Issues Raised by Managed Care Liability Proposals

Imposing liability on managed care plans raises several challenging policy questions.

• The appropriateness of negligence remedies. A question underlying the debates over managed care plan liability is whether the process of seeking financial awards for negligence (misconduct) under American tort law is the best way to remedy participants’ disputes over plan coverage. Would other mechanisms like arbitration or the Texas external review procedure be quicker and more cost-effective?
• Cost impacts. The potential impact of expanded managed care plan liability on costs of medical care has not been evaluated and deserves further examination.
• ERISA. States face challenges to expanding consumer remedies for managed care plan decisions because of ERISA, the Employee Retirement Income Security Act of 1974. ERISA governs private sector health and other employee benefit plans. The Supreme Court has interpreted a provision in ERISA that preempts state laws affecting employee benefit plans to mean that health plan participants are prohibited from suing their plans in state court when they are injured by plan coverage denials or delays. ERISA provides very limited remedies for such injuries. Only Congress can change this interpretation of federal law.

The Missouri managed care plan liability law is unlikely in itself to draw an ERISA challenge because it merely removes a defense to lawsuits against managed care plans. By creating a new source of liability for negligent coverage denials and delays, however, the Texas law raises ERISA issues and has already been contested in federal court by Aetna.

Summary and Key Findings

Public and private health care purchasers are attracted to managed care because of its potential to avoid wasteful care, improve coordination of care, and hold an organization accountable for personal health status improvements. But managed care raises the dilemma of how to cut fat (inappropriate care) without cutting muscle (appropriate care). Purchasers need to appreciate the potential for managed care plans to harm consumers through care coverage denials as well as consumers’ fears that their doctors can no longer act in their patients’ best interests. On the other hand, consumers need to understand the costs they incur when higher health coverage premiums from marginally effective or excessive care reduce the money their employers have to pay wages.

To summarize, the report’s key findings are:

• The successful passage of these liability expansion proposals was due in large measure to the overwhelming tide of popular support for state policy makers to do something about managed care plan coverage denials that were seen as arbitrary and unfair.
• Currently, general legal (“common law”) theories provide state court remedies for managed care plan actions that injure consumers. But in many states, the “corporate practice of medicine” defense may bar suits against managed care plans. Such states at least would need to eliminate this immunity in order to allow plan participants to sue managed care plans, if these lawsuits are considered appropriate policy.
• So far, states have taken two approaches to increase managed care plan liability: 1) repealing the “corporate practice of medicine” defense, leaving to the state’s courts to define how liability can be imposed, and 2) creating an explicit statutory definition of managed care plan liability.
• ERISA, the federal pension law, limits the remedies available to consumers in private sector employee plans to suits to enforce plan terms or recover the cost of the denied benefits. Unlike other types of civil lawsuits against doctors or insurance companies, employee health plan participants cannot sue in state court for lost wages, pain and suffering or punitive damages. Consequently, ERISA may override newly enacted health plan liability laws, and only Congress can amend ERISA.
• In developing a fair way to redress disputes between consumers and their plans, policy makers must balance procedures through which consumers can obtain needed care or compensation for injuries against potential adverse effects of such remedies on the ability of managed care plans to reduce inappropriate care and contain costs.
• A procedure under which plan participants can appeal coverage denial decisions to a review organization outside the plan could offer several advantages. It could provide an appeal mechanism independent of the plan and avoid real and perceived conflicts of interest. It also could offer a way to resolve coverage disputes before harm occurs, averting the need for later lawsuits.

* * *A full copy of the report can be ordered by calling the Kaiser Family Foundation’s publication request line at (800) 656-4KFF and asking for document #1343. A report on The Impact of Managed Care Legislation: An Analysis of Five Legislative Proposals from California is avaialble separately. Return to top

Managed Care Plan Liability: An Analysis Of Texas And Missouri Legislation

The Impact of Managed Care Legislation: An Analysis of Five Legislative Proposals From California