Health Care Law(redirected from Health Care Insurance)
Health Care Law
Health care law involves many facets of U.S. law, including torts, contracts, antitrust, and insurance. In 1990, the United States spent an estimated $500 billion on health care, which was more than 11 percent of the gross national product. According to statistics from the centers for medicare and medicaid services (CMS), health care expenditures grew 6.5 percent per year from 1991 to 2001, and in 2001, the expenditures had grown to $1.4 trillion. The CMS predicts that these expenditures will grow by 7.3 percent annually and estimates that the U.S. will spend $3.1 trillion on health care in 2012.
One major area within health care law is Medical Malpractice, which is professional misconduct or lack of skill in providing medical treatment or services. The victims of medical malpractice seek compensation for their physical or emotional injuries, or both, through a Negligence action.
A defendant physician may be found liable for medical malpractice if the plaintiff patient can establish that there was in fact a patient-physician relationship; that the physician breached (i.e., violated or departed from) the accepted standard of medical care in the treatment of the patient; that the patient suffered an injury for which he or she should be compensated; and that the physician's violation of the standard of care was the cause of the injury.
To protect themselves against the massive costs of such claims, physicians purchase malpractice insurance. Physicians' malpractice premiums total billions of dollars each year and add substantially to the cost of health care in the United States. In some specialties, such as obstetrics, 50 percent of the cost for medical services goes for the provider's malpractice premiums. Many physicians, faced with the rising tide of malpractice premiums, practice "defensive medicine" by ordering tests and procedures that might not be necessary, so that the records will show that they did all they could. Several studies have estimated the cost of defensive tests and procedures at tens of billions of dollars per year.
Medical malpractice liability can extend to hospitals and even to health maintenance organizations (HMOs). In the case of severe injuries, this can provide a plaintiff patient with an additional source of compensation. One complicating element is a historical doctrine that disallows the corporate practice of medicine—which in effect, and sometimes in actuality through statutes, prohibits the employment of physicians. In states that disallow the corporate practice of medicine, plaintiffs may not bring medical malpractice claims against HMOs or hospitals based on a physician's treatment because the doctors are not considered employees.
Because every state prohibits the practice of medicine without a license, and because a corporate or business entity may not obtain a license to practice medicine, the historical model provided that all physicians were independent contractors (i.e., separate economic entities), even in their role on the medical staff of a hospital. Without an explicit employer-employee relationship, the liability of a physician for malpractice most likely could not be imputed (i.e., passed along to) a hospital.
The legal theory of respondeat superior holds an employer liable for the negligent acts of an employee who acts within the scope of employment. Historically, as most physicians were not employees, this theory of liability was often defeated in medical malpractice suits. Today, however, most courts look beyond the title given to the relationship, and to the control that the hospital or health care organization exerts over the physician in question, to determine whether the relationship is more like that of an employer and employee (e.g., where the processes and treatment decisions are tightly prescribed by the organization, and liability may be imputed) or whether it is truly that of an Independent Contractor and a client (e.g., where the physician acts alone to accomplish a particular end result, and liability may not be imputed).
The legal theory of ostensible agency can also attach liability to a hospital or health care organization for an individual physician's malpractice. No employer-employee relationship needs to be shown here. Ostensible agency liability is created where the principal (the hospital or health care organization) represents or creates the appearance to third persons that the physician is an agent of the principal, subject to the principal's control. This theory focuses on the reasonable expectations and beliefs of the patient, based on the conduct of the hospital or health care organization. The actual relationship of the physician and the hospital or organization is immaterial.
Most states have enacted legislation that modifies the common law action of medical malpractice, in an attempt to stem the rising tide of lawsuits. Restrictions on plaintiff patients include shorter statutes of limitations (i.e., times within which a lawsuit must be filed after injury) than those provided for in common law actions, and a required Affidavit from a physician expert witness, certifying that the applicable standard of care in the particular case was violated by the defendant physician and that the violation caused the plaintiff patient's injuries.
Even with legislation in these states, the costs of medical malpractice liability have increased, and, in some parts of the country, skyrocketed. Doctors in some areas claim that liability insurance is so high that they refuse to accept patients, move their practice to another state, or even retire early. Insurance companies that provide malpractice insurance claim that multi-million-dollar judgments in medical malpractice cases, coupled with lawsuits deemed frivolous by the companies, have been the root cause of the increase in rates.
Several states have considered and passed legislation under the pretext of major tort reform. California law provides a model by which several states have followed. In 1975, the California legislature enacted the Medical Injury Compensation Reform Act (MICRA), which capped non-economic damages—which include damages for pain and suffering, and even death—at $250,000. Many states that have followed California's lead have limited such damages to between $250,000 and $350,000. President george w. bush has called for major reform on a national level, requesting that Congress enact legislation that could create a national cap of $250,000 on non-economic damages in all medical malpractice cases. The majority of medical associations, including the American Medical Association, have lobbied Congress and state legislatures to pass this type of law. Other proposals include limiting the recovery of attorney's fees in medical malpractice cases, restricting the liability of a doctor who provides emergency care, and limiting the recovery of attorneys in medical malpractice cases.
These efforts are not without their critics. Skeptics point out that in some states, the cap on non-economic damages has not resulted in lower premiums on malpractice insurance, and that bad business practices of insurance companies have been as or more responsible for the rise in liability insurance premiums as the multi-million-dollar judgments. Without major insurance reform, say these critics, the local and national tort reform efforts will not provide what they promise.
Physician Malpractice Records
In the past, it was very difficult for patients to discover malpractice information about their physicians. The federal government maintains the National Practitioners Data Bank, which lists doctors and malpractice claims in excess of $20,000, along with state disciplinary records. Its list is not made available to the public, but it is provided to state medical boards, hospitals, and other organizations that grant credentials. Because of the great demand by patients for this information, many states are enacting legislation that makes it readily available. For example, the state of Washington provides access to physician information through several sources: insurance company claims records, which are required by law to be reported to the state; the National Practitioners Data Bank; and the state board of medicine, which administers physician licensing and discipline. Massachusetts created a similar system, called the Physician's Profiles Project, and other states, including Florida, California, and New York, are considering the same kind of initiative.
A Physician's Duty to Provide Medical Treatment
Medical malpractice dominates the headlines, but a more basic legal question involving medical care is the affirmative duty, if any, to provide medical treatment. The historical rule is that a physician has no duty to accept a patient, regardless of the severity of the illness. A physician's relationship with a patient was understood to be a voluntary, contracted one. Once the relationship was established, the physician was under a legal obligation to provide medical treatment and was a fiduciary in this respect. (A fiduciary is a person with a duty to act primarily for the benefit of another.)
Once the physician-patient relationship exists, the physician can be held liable for an intentional refusal of care or treatment, under the theory of Abandonment. (Abandonment is an intentional act; negligent lack of care or treatment is medical malpractice.) When a treatment relationship exists, the physician must provide all necessary treatment to a patient unless the relationship is ended by the patient or by the physician, provided that the physician gives the patient sufficient notice to seek another source of medical care. Most doctors and hospitals routinely ensure that alternative sources of treatment—other doctors or hospitals—are made available for patients whose care is being discontinued.
The discontinuation of care involves significant economic issues. Reimbursement procedures often limit or cut off the funding for a particular patient's care. Under the diagnosis-related group (DRG) system of Medicare, part A, 42 U.S.C. § 1395c, a hospital is paid a pre-set amount for the treatment of a particular diagnosis, regardless of the actual cost of treatment. Patients who are covered by private insurance or HMOs may lose their coverage if they fail to pay premiums. Physicians and hospitals must act carefully when this happens, because the fiduciary nature of the relationship between provider and patient is not changed by a patient's unexpected inability to pay. Health care providers must notify a patient and even must help to secure alternative care when funds are not reimbursed as expected.
A Hospital's Duty to Provide Medical Treatment
The historical rule for hospitals is that they must act reasonably in their decisions to treat patients. Hospitals must acknowledge that a common practice of providing treatment to all emergency patients creates among members of a community an expectation that care will be provided whenever a person seeks care in an "unmistakable emergency." Seeking alternative care in a time-sensitive emergency situation could result in avoidable permanent injury or death, so it is not surprising that hospitals are held to a more flexible "reasonable duty" standard in their admission of patients for treatment.
Owing to the high cost of emergency room care, many private hospitals in the early 1980s began refusing to admit indigent patients and instead had them transferred to emergency rooms at municipal or county hospitals. This practice, known as patient dumping, has since been prohibited by various state statutes, and also by Congress as part of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (Public Law No. 99-272), in a section titled Emergency Medical Treatment and Active Labor Act (EMTALA) (§ 9121(b), codified at 42 U.S.C.A. § 1395dd). Under EMTALA, hospitals that receive federal assistance, maintain charitable nonprofit tax status, or participate in Medicare are prevented from denying emergency treatment based solely on an individual's inability to pay. EMTALA allowed private enforcement actions (i.e., lawsuits by individuals) and civil penalties (i.e., fines) for hospitals that violate its provisions. Patients who must receive medical treatment include people whose health is in "serious jeopardy" and pregnant women in active labor. The EMTALA duty to provide treatment may be relieved only if a patient is stabilized to the point where a transfer to another hospital will result in "no material deterioration of [his or her] condition."
The U.S. Supreme Court in Roberts v. Galen of Virginia, Inc., 525 U.S. 249, 119 S. Ct. 685, 142 L. Ed. 2d 648 (1999), ruled that patients who have an emergency medical condition who are transferred from a hospital before being stabilized may sue the hospital under the EMTALA. The Court interpreted EMTALA to allow any patient to sue under the stabilization requirement, even those who are not emergency room victims of patient dumping. Under the decision, a patient may recover if a hospital transfers the patient without stabilizing his or her condition, regardless of whether the doctor who signed the transfer order did so because the patient lacked Health Insurance, or for any other improper purpose. Lower federal courts have conflicted over other aspects of the EMTALA, including whether the plaintiff must prove an improper motive when a hospital fails to screen an emergency patient. The high court has not resolved all of these conflicts.
Similar federal statutes require that hospitals treat all patients who have the ability to pay. Federal law prohibits discrimination on the basis of race, color, or national origin, by any program that receives federal financial assistance (42 U.S.C.A. § 2000d). Almost all hospitals receive this kind of funding, and many derive half or more of their revenue from Medicare or medic-aid. Section 504 of the Rehabilitation Act of 1973 (29 U.S.C.A. § 794) prohibits federally funded programs and activities (including hospitals that receive federal funds) from excluding any "otherwise handicapped individual … solely by reason of his handicap."
The broad definition of handicap is "physical or mental impairment that substantially limits one or more of a person's major life activities." This has been construed to include Acquired Immune Deficiency Syndrome (AIDS) and asymptomatic HIV. Thus, hospitals that receive federal aid may not deny treatment to patients who are HIV-positive or who have AIDS. At the state level, similar legislation protects access to all state-licensed health care facilities and to the services of treating physicians.
Antitrust and Monopoly
The same antitrust and Monopoly laws that govern businesses and corporations apply to physicians, hospitals, and health care organizations.
Sherman Act The sherman anti-trust act of 1890 (15 U.S.C.A. § 1) prohibits conspiracies in restraint of trade that affect interstate commerce. Often, physicians who are denied admittance to, or who are expelled from, the medical staff of a hospital file a lawsuit in federal court, against the medical staff and the hospital, claiming violation of the Sherman Act.
To understand why this kind of federal action applies in this situation, one must first understand the unique relation of doctors to hospitals. Doctors generally do not work for a particular hospital, but instead enjoy staff, or "admitting," privileges at several hospitals. They are accepted for membership on a medical staff by the staff itself, pursuant to its bylaws. The process of selecting and periodically re-evaluating medical staff members (called credentialing or peer review) can result in a denial of admittance to, or expulsion from, the medical staff.
Physicians who are denied admittance to, or expelled from, a hospital's medical staff and file a claim of Sherman Act violation in federal court are essentially claiming that they are being illegally restrained from their trade (i.e., practicing medicine). It is the unique relation between doctors and hospitals, described earlier, that satisfies the first element of a Sherman Act violation, which is that a conspiracy must exist. Normally, a single business cannot conspire with itself to restrain trade—a conspiracy requires a concerted, or joint, effort between or among two or more entities. Because physicians, as independent contractors, constitute individual economic entities, when they vote as a medical staff to admit or expel a physician, they are acting in the concerted, or joint, fashion described by the statute.
The second element of a Sherman Act violation is that a restraint of trade must occur. One rule states that any restraint of trade, especially in the commercial arena, may be viewed as per se (i.e., inherently) illegal. However, courts often have resorted to comparative analysis to balance the pro-competitive versus anticompetitive effects of a medical staff's decision. For example, if a physician has a history of incompetent or unethical behavior, then a denial of medical staff privileges can be independently justified. On the other hand, if there is only one hospital in a small town, and the physician in question meets all qualifications for ethics and competence, a denial of medical staff privileges may well constitute illegal restraint of trade.
The final element of a Sherman Act violation, that the action must substantially affect interstate commerce, is a jurisdictional requirement, which means that if it is not satisfied, the federal court has no jurisdiction to hear the dispute, and the Sherman Act does not apply. Courts are split as to whether a medical staff's decision to grant or deny medical staff privileges satisfies this element. Some courts view the practice of a single physician to have a minimal, as opposed to the required substantial, effect on interstate commerce, and hold that the jurisdictional element is not met. Other courts focus on the activity of the entire hospital (e.g., receipt of federal funds, purchase of equipment from other states, reimbursement from national insurance companies), and find that the jurisdictional element is met.
Challenged medical staffs and hospitals often raise the "state-action" exemption, which exempts from federal Antitrust Law activities required by state law or regulations. Many states mandate the peer-review process, even at private hospitals, but in order for an exemption based on this mandate to negate a finding of a Sherman Act violation, the state must supervise the process closely.
Clayton Act Section 7 of the Clayton Anti-Trust Act of 1914 (15 U.S.C.A. § 18) prohibits mergers if they "lessen competition or tend to create a monopoly." To be valid, a merger must not give a few large firms total control of a particular market, because of the risks of price-fixing and other forms of illegal collusion. Market-share statistics control merger analysis, and they are based on a "relevant market." The Clayton Act can prohibit a national hospital-management company from purchasing several hospitals in one town, and it even can prohibit joint ventures between hospitals and physicians or between formerly competing groups of practicing physicians.
Several exceptions apply to these prohibitions. If a hospital is on the verge of Bankruptcy and certain closure, but for the merger, then the merger will be allowed. Nonprofit hospitals long enjoyed complete exemption from Section 7 of the Clayton Act, but now federal district courts are split as to whether the act applies to nonprofit hospitals. In any case, a careful market analysis that shows that particular relevant markets do not overlap—and hence do not lessen competition or create a monopoly—can be used as evidence to uphold a merger decision between two or more health care entities.
Health Care Insurance
A trend toward "managed care" and away from "fee-for-service" medicine has been sparked by significant changes in the health insurance industry. Health care insurance originated in the 1930s with Blue Cross (hospitalization coverage) and Blue Shield (physician services coverage). It traditionally has stayed out of the provision of health care services and has served as a third-party indemnitor for health care expenses; that is, in exchange for the payment of a monthly premium, a health care insurance company agrees to indemnify, or be responsible for, its insured's health care costs pursuant to the specific provisions in the health insurance policy purchased.
Skyrocketing costs in health care spurred public and private reform. The federal Medicare Program introduced diagnosis-related-groups (DRGs) in 1983, which for the first time set predetermined limits on the amounts that Medicare would pay to hospitals for patients with a particular diagnosis. Employers seeking lower health care costs for employees have increasingly chosen Managed Care options like HMOs and preferred provider organizations (PPOs), both of which use cooperation and joint efforts among patients, health care providers, and payers to manage health care delivery so as to reduce costs by eliminating administrative inefficiency as well as unnecessary medical treatment.
Health care law will continue to be affected by the country's move toward managed care as the predominant health care delivery model. For example, HMOs' potential liability for medical malpractice could increase because many HMOs operate on a "staff model" whereby physicians are explicitly hired as "employees," thus making it easier to demonstrate respondeat superior liability for the negligent acts of their physicians. In addition, many HMOs exercise greater control over the discretion of individual physicians with regard not only to primary care but also to specialist referrals and the prescribing of certain drugs. The historical bright line forbidding the corporate practice of medicine is thus blurred even further by managed care.
HMOs operate on a prepaid basis, making monthly capitation (i.e., per patient) payments to participating physicians and physician groups. PPOs operate on a reduced-fee schedule, offering lower fees for patients who seek care from a "preferred provider," who functions both as a primary care doctor and as a gatekeeper for such tasks as specialist referrals. Both use "networks" of physicians and health care providers. The standard duty to provide medical care applies to physicians in these networks, but new issues arise regarding the payment or reimbursement of expenses. Some managed-care plans offer limited "out-of-network" benefits, some offer none at all. Should an employer change health plans, an employee with an established physician-patient relationship might find that the treating physician is not part of the new provider's network. If the patient cannot or will not cover subsequent medical costs independently, who has the responsibility to secure alternative treatment for the patient? Who should pay for that treatment? These questions have not yet been resolved. Many patients in this situation start over again with a new physician, out of economic necessity, and many are not happy about that involuntary termination of the physician-patient relationship.
Another potential issue for physician networks and "integrated delivery systems" (which include primary care physicians, specialists, and hospitals) is price-fixing, which has traditionally been held to be per se illegal under the Sherman Act. PPOs are under particular scrutiny in this regard, as a PPO is a group of health care providers who agree to discounted fees in exchange for bulk business (e.g., medical care for all of a particular company's employees). These providers are individual economic entities, and as such they must exercise great care in the concerted, joint effort of setting prices and fees, in order to avoid accusations of conspiracy to restrain trade through illegal price-fixing. Likewise, integrated delivery systems must be ever mindful of Clayton Act prohibitions against monopolies, and they must carefully tailor their joint ventures and other agreements to minimize their anticompetitive effects on relevant markets.
Congress has sought unsuccessfully to pass so-called Patients' Bill of Rights—legislation to improve Patients' Rights under private health insurance plans, which cover as many as 169 million Americans. In 2000, Democrats in both houses of Congress pushed for legislative reforms to address perceived shortcomings in the HMO industry. They sought an appeals process to allow patients to challenge HMO decisions before a board of independent doctors. They also fought to give patients the right to sue HMOs in state court for damages resulting from delays and improper denials of treatment. Polls suggested that as many as 70 percent of Americans favored such reforms.
Senate Republicans and most House Republicans, however, feared that the reforms would increase the cost of health care, drive up insurance premiums, and thus add to the already 43 million Americans who are uninsured. Senate Republicans in 1999 and 2000 sought to pass their own patients' bill of rights, and although the bill garnered support in both houses, Democrats and Republicans were unable to reach a compromise about specific portions of the bill.
With the subject reaching an impasse in Congress, as of 2003 at least 45 states have enacted their own versions of a patients' bill of rights. In April 2003, the U.S. Supreme Court, in Kentucky Association of Health Plans v. Miller, 538 U.S. 329, 123 S. Ct. 1471, 155 L. Ed. 2d 468 (2003), reviewed a provision of Kentucky's Health Care Reform Act that sought to regulate HMOs. The HMO in the case claimed that Kentucky's law was pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA). The Court, per Justice Antonin Scalia disagreed, holding that the Kentucky law regulated insurance, rather than an employee retirement plan, and thus that the ERISA preemption does not apply.
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