State Senator Tim Murphy introduced comprehensive limits on managed care in February

By Margaret C. Albert

Published March 1997

• Four proposals compared

• React to this article in the Discussion Forum.

The rush to control health care costs through managed care in the late 1980s and early ‘90s may be matched in the second half of the decade by a similar urgency to manage managed care through state-level legislation and regulation. Proposals to regulate managed care have come and gone in recent years. Bills in the Pennsylvania legislature have been introduced and have failed in each of the last four years. But with recent high-profile abuses by managed care companies receiving conspicuous media coverage in recent months, there would appear to be more public support than ever to press for regulatory checks against those abuses. The current atmosphere for change may be enough to make a difference this year.

By the end of 1996, 13 states had enacted comprehensive managed care legislation based on model bills such as the American Medical Association’s Patient Protection Act, and more than half the states, including Pennsylvania, have managed care-related bills in the works for 1997.

Managed care reform efforts have succeeded in New York and in New Jersey. Sweeping legislation in New York was enacted in June by an overwhelming majority vote of both houses. New York Governor George Pataki brokered a compromise by convening providers, consumers and representatives of the insurance industry. On February 4, New Jersey released comprehensive new regulations for HMOs developed by the state Department of Health and Senior Services and the commissioner’s 32-member advisory committee. They go into effect March 15. The regulations were supported by New Jersey Citizens Action, a consumer coalition of senior citizens, labor, health and civic organizations, the HMO Association of New Jersey and the Medical Society of New Jersey.

Here in Pennsylvania, at least four separate legislative initiatives are at various stages of development: a Harrisburg-based coalition of providers and consumer advocates is hammering out the language for a package of eight bills; the Pennsylvania Medical Society is fine-tuning a bill focusing on utilization review and disclosure; freshman Senator Tim Murphy (R-Allegheny County) unveiled SB 100, the Quality Health Care Protection Act; and five House Bills (HB 320-324) have been introduced by Rep. Richard D. Olasz (D-Allegheny County).

Managed Care Accountability Coalition

Spearheading the most comprehensive approach to managed care reform is the 18-month-old statewide Managed Care Accountability Coalition. An almost even mix of providers and consumer advocates, the Coalition is convened jointly by Lu Conser, director of government relations for the Pennsylvania Providers Association, and Terry Roth, an attorney and legislative consultant to the Maternity Care Coalition.

"Managed care is an industry inventing itself," Conser said. "We’re not out to do a hatchet job on it. We recognize that the ‘good old days’ of fee-for-service medicine had flaws and managed care has great potential. Our goal is to see that it lives up to that potential."

Testimony from a wide range of organizations and individuals representing consumers and health practitioners pointed up a number of common concerns, said Roth: access to specialists, timeliness and fairness of utilization review and grievance proceedings, marketing practices of managed care organizations (MCOs), disclosure of financial and quality data and physician penalties for making specialty referrals, for discussing treatment options with patients or for revealing financial incentives that are part of the MCO contract.

The Coalition plans to draft and promote a legislative package similar to model acts that have been passed in other states, but tailored to the specific needs of Pennsylvania patients and providers. Preliminary discussions with lawmakers indicate strong bi-partisan support in both houses, and final language for the eight bills that make up the package will be completed in time for its introduction during the 1997 session, said Conser.

To a large extent, the Coalition itself—composed of advocates for persons with chronic illnesses and disabilities, the elderly, and children, church and labor representatives and provider groups of nurses, social workers, pharmacists, psychologists, optometrists and podiatrists—also mirrors the collaborative approach that has succeeded in passing such legislation in other states. At this point, however, two critical sectors are missing: managed care organizations and physicians.

Mary Ellen McMillen, vice president for legislative policy at Independence Blue Cross’s managed care subsidiary, AmeriHealth, said she has not joined the group because she "wasn’t invited." She said she would welcome the opportunity to come to the table and that she is confident that her counterparts in other MCOs would, too. Conser explained that the Coalition delayed involving the MCOs until the group was "organized." New groups are joining regularly, she said, and direct outreach to MCOs and physicians will begin soon.

To date, no physician or physician organization has signed on as a member of the Coalition. Edward Nielson, chief executive officer of the 4300-member Academy of Family Physicians, has attended meetings, at first as a "skeptical observer." He believes that physicians could support the proposed legislation but hesitates to commit himself or the Academy until the language of the bills is finalized.

Pennsylvania Medical Society Proposal

Pennsylvania Medical Society President Victor F. Greco, M.D., expresses similar reservations about the Coalition bill’s language. He sees no reason to join the Coalition because, he said, the Medical Society has its own coalition, which includes medical and osteopathic physicians, medical specialty societies and the Hospital Association of Pennsylvania. PMS is currently working with Representative Pat Vance (R-Cumberland County) to refine the language of HB 2797, which died in the last legislature. Less comprehensive than either the Coalition’s proposals or Murphy’s bill, it focuses on utilization review and selective contracting safeguards.

Greco stressed that bringing accountability to managed care has been a major PMS priority for the last two or three years. PMS, he said, was instrumental in passing HB 1977, which mandates minimum maternity stays, in the last session and is currently promoting legislation for minimum lengths of stay following mastectomies. "We’ve got to begin to bring the medical portion of managed care under the control of MDs instead of MBAs," he said. "The practice of medicine is not a business."

Greco became aware of the Managed Care Accountability Coalition by chance when the Coalition’s January 16 public forum happened to be scheduled in a hotel room across the hall from a PMS managed care meeting for health care providers. He spoke with the conveners at that time, and, while he’s not inclined to join the Coalition, he said that PMS would welcome members’ participation in the Medical Society’s legislative efforts if they are willing to "join us in what we feel is the way to handle this situation."

According to Don McCoy, PMS director of regulatory affairs and specialty legislation, the Medical Society’s major concern with all of the proposals, including the Vance bill, is that utilization reviewers be professionals licensed in Pennsylvania and that Pennsylvania-licensed physicians who are in active practice have responsibility for any final denials of coverage. He believes that physicians could support in concept both the Coalition package and Representative Murphy’s bill but may differ on the details of implementation.

SB 100: Quality Health Care Protection Act

Senator Murphy, a clinical psychologist who had wrestled with managed care problems as a staff member at Pittsburgh’s Mercy and Children’s Hospitals, arrived in Harrisburg in January with health care reform at the top of his list of priorities.

"In my own practice, I’ve seen changes made in the name of saving money that resulted in the deterioration of patient care and the undermining of the roles of those delivering the care," he said. "In fact, that’s one of the reasons I ran for office. I knocked on 30,000 doors and the litany of managed care horror stories I heard solidified my resolve to do something about it."

It took only six weeks to produce his draft legislation and line up 14 supporters in both the Senate and the House. Murphy’s bill covers many of the same issues as the Coalition’s legislation: quality and access to providers, physician and specialist involvement in utilization review and grievance appeals, prohibition of gag clauses and financial disincentives for specialty referrals, requirement for full disclosure in "plain language" of the plan’s benefits, procedures and structure to enrollees, and monitoring and publication of both outcome and fiscal audits. It also includes stringent confidentiality rules, provides for continuing care with the patient’s own physician for at least one year if the physician is terminated from the plan and requires a "point of service" option that allows patients to use non-plan providers by paying extra.

Enforcement of the legislative mandates is achieved through initial certification and triennial recertification by the Secretary of Health and the Insurance Commissioner of all managed care plans. Murphy’s bill does not specifically include the use of specialists, when appropriate, as primary care physicians, does not directly address problems of Medicaid managed care (although they are included in the general provisions) or marketing, and does not call for a managed care ombudsman.

HBs 320-324

"As HMOs continue to increase their share of the health care insurance market, it is becoming more and more evident that we need to do a better job of protecting our constituents and Pennsylvania’s health care providers," said Representative Richard D. Olasz, who has introduced five bills to that effect in the House in early February. Olasz is no newcomer to this issue; his first bill containing managed care regulation was introduced four years ago.

The five bills, reintroduced from last session: require HMOs to contract with and accept the services of any qualified health care provider willing to meet negotiated payment levels and adhere to established quality standards; require insurers and employee benefit plans to accept any pharmacy or pharmacist into the plan who is willing to meet established terms and conditions; require health care providers under contract with an HMO to post that HMO’s grievance procedure in the medical office and create a toll-free HMO grievance number for the PA Department of Health; prohibit HMOs from instituting financial incentives or penalties for health care practitioners based on limited treatment or care of patients and requires HMOs to notify subscribers yearly regarding coverages, utilization review requirements, physician credentialing standards and the percentage of premium dollars allocated to health care costs rather than to administration and profits; require HMOs to spend 85 percent of their premium dollars on health care costs for subscribers for one year, increasing to 90 percent within five years.

Chances of Success

Roth, McCoy, and Murphy agree that the primary opposition to the legislation will come from the insurance industry, and each plans to meet with MCOs to define areas of common ground and potential compromise that could disarm the objections. McCoy says that Representative Nicholas A. Micozzie (R-Delaware County), who is chairman of the House Insurance Committee, plans to convene MCOs soon to review the legislative proposals.

Murphy, who is planning a series of public hearings across the Commonwealth, is counting on a forceful voice from both consumers and providers to push the legislation through both houses. None of the proponents sees a problem in presenting multiple bills during the legislative session. They acknowledge that the specifics will change somewhat during the debate, but all feel that the lawmakers are open to managed care legislation and that, in some form, it will be passed in this session.

That view is not universally held. One analyst feared that the the health insurance industry will be able to block any substantial legislation in the coming session. Comprehensive initiatives might get watered down into "feel-good measures," which achieve visible but limited reform, the analyst warned, alluding to measures against so-called "drive-through" deliveries and mastectomies.

The state’s parallel reform efforts are not yet collaborative across groups, as was New Jersey’s initiative, which united consumers, physicians and insurers. Each group has its own vested interests, which could prevent the cooperation needed to succeed. "If providers don’t pull together, they will lose, and lose big," predicted the analyst. Insurance companies may capitalize on the turf battles that keep groups fragmented.

Roth agrees with the need for groups to collaborate. "We’re on parallel lanes at this point, all headed in the same direction. Past efforts at reform have failed because the various interest groups have not come together around their common concerns. Our challenge is to see that those parallel courses eventually converge." But until coalition members "swallow some ego," said the analyst, reform efforts may realize only limited success and remain reactive rather than proactive.

The proposed legislative initiatives appear to differ chiefly in comprehensiveness. All are derived from national models, and they cover much common ground. Whether any one or a combination survives the legislative process may depend less on content or language than on whether their advocates are willing to merge their separate lanes into a single superhighway. The New York and New Jersey experience is testimony to the political value of compromise and cohesion.