What is an employee benefit plan?: ERISA preemption of "any willing provider" laws after Pegram

This note considers the implications of a recent Supreme Court decision, Pegram v. Herdrich, for preemption of state laws under the Employee Retirement Income Security Act (ERISA). Though Pegram dealt with a fiduciary liability question, and not preemption specifically, the Court in arriving at its decision laid out a definition of the word "loan"--a word that is used in both the fiduciary liability section of ERISA and the preemption section. The Court's definition focuses upon the relationship between the managed care organization and the employer that hires it. The definition, however, excludes from the meaning of "plan" the relationship between the managed care organization and the health care providers it hires. Thus, this Note argues that according to Pegram, state laws that regulate the relationship between managed care organizations and health care providers, such as "any willing provider" laws, should not be preempted by ERISA.     

Disease management: legal strategies for the next generation of managed care

The provision of proper and cost-effective healthcare to chronically ill patients is a crucial aspect of succeeding at managing care. An increasing number of managed care organizations are relying upon specialized outside providers to manage patients with such diseases. In such circumstances, this type of care is "carved out" and given to a specialized disease management organization. The authors discuss the strategies behind such arrangements, provide case studies of many of the specialized organizations providing such disease management, and analyze the legal issues that are likely to arise from such contractual relationships.     

The complexities of managed care: operating a voluntary system

The implementation of state-sponsored voluntary case management programs for public assistance recipients creates provider and recipient recruiting problems that are unique to the state's economic environment, its political climate, its historic relationship with providers, its program goals, and its implementation strategies. This implementation study discusses the factors that influenced the operationalization of the Massachusetts managed care program for AFDC families. The issues of provider recruitment and recipient enrollment are examined in relation to the formal program goals of cost containment and access. The operational and bureaucratic problems the state Medicaid staff has experienced in maintaining the program evokes questions of who should administer the programs, who the best types of providers are in light of program goals, and how recipients can be enrolled in a voluntary program.     

State Medicaid managed care enrollment: understanding the political calculus that drives Medicaid managed care reforms

The objective of this article is to understand the political motivations underlying Medicaid managed care reforms by examining the determinants of enrollment of beneficiaries in managed care plans in the fifty states. To highlight the role of the model variables, including measures of the political environment, public interest, and special interests, a distinction is made between capitated and fee-for-service managed care enrollment. The results show that cost containment within the context of the Medicaid program is perceived as strongly favored by voters. Accordingly, the relative cost and tax price of providing Medicaid services are important factors in states' decision to enroll Medicaid beneficiaries in managed care plans, particularly capitated ones. The results also indicate a surprisingly significant influence by labor unions that generally oppose managed care enrollment for fears of lost jobs. The recipient population and provider groups also play an important role in shaping the Medicaid managed care landscape. The influence of variables measuring states' ability and willingness to pay and median voter preferences suggest that, within the context of Medicaid managed care enrollment, the public's interests are being served; however, the results also point toward inequities within the program and implications concerning financing arrangements between states and the federal government.     

Legislative responses to managed care pressures

Changes brought about by the increasing presence of managed care have sparked responses in a number of states. While proponents of managed care contend that it fosters competition and allows the market to influence its nature and functioning, the legislators' responses call into question the notion that managed care will bring greater freedom to insurers and providers and, at the same time, will benefit health care consumers.     

The Political Origins of Judicial Empowerment through Constitutionalization: Lessons from Four Constitutional Revolutions

Drawing upon an analysis of the political vectors behind constitutional reform in Israel (1992), Canada (1982) New Zealand (1990), and South Africa (1993), the article suggests that the trend toward constitutionalization in culturally divided polities has not been adequately delineated by extant theories of constitutional transformation. An examination of the political origins of these four constitutional revolutions suggests that judicial empowerment is in many cases the consequence of a conscious strategy undertaken by threatened political and economic elites seeking to preserve their hegemony vis-a-vis the growing influence of "peripheral" groups in crucial majoritarian policymaking arenas. In response to perceived threats by peripheral groups, elites who possess disproportionate access to and influence upon the legal arena often initiate a constitutional entrenchment of rights in order to insulate policymaking from popular political pressure. Power is transferred from majoritarian decision-making arenas to national high courts, where they assume their policy preferences will find greater support. This process of conscious judicial empowerment is likely to occur (a) when the judiciary's public reputation for political impartiality and rectitude is relatively high and (b) when the courts are likely to rule, by and large, in accordance with the cultural propensities and policy preferences of the traditionally hegemonic elites.     

Pegram v. Herdrich: On peritonitis, preemption, and the elusive goal of managed care accountability

Managed care presents the paradox of organizations having real power over people's lives without there being clear or consistent means of ensuring accountability. In Pegram v. Herdrich, the United States Supreme Court struggled with whether "fiduciary duties" under the federal Employee Retirement Income Security Act (ERISA) could be used to counterbalance the incentives that HMOs have to deny necessary care. Given press coverage of the case, however, it was easy to get the impression that the managed care industry itself was on trial in Pegram. This report examines the political and legal forces underlying the dispute and analyzes the Supreme Court's unanimous rejection of the notion of federally imposed duties for HMOs. In the absence of ERISA fiduciary obligations, attention must now shift to developments in state tort law, the scope of federal ERISA preemption, and the prospect of legislative reform. The report concludes with an exploration of how the elusive goal of managed care accountability might be pursued in the wake of Pegram.     

Will pay for performance be worth the price to medical providers? A look at pay for performance and its legal implications for providers

This article explores the legal implications of pay for performance programs from the perspective of healthcare providers. The author provides an informative background on the emergence of pay for performance programs and examines the structure and operation of these programs. She then explores the liability issues of health plans and managed care organizations and delves into evidentiary issues related to pay for performance information. Her article concludes with some practical suggestions for providers in preparing for an expansion of these quality initiatives.     

A conversation with Donald Berwick on implementing national health reform

Michael Birnbaum interviews Donald Berwick shortly after his departure from the Centers for Medicare and Medicaid Services about the national health care landscape. Berwick discusses the strategic vision, policy levers, operational challenges, and political significance of federal health care reform. He rejects the notion that the Affordable Care Act represents a government takeover of health care financing or service delivery but says the law's Medicaid expansion and its creation of health benefit exchanges present a "watershed moment for American federalism." Berwick argues that the solution to Medicare's cost-containment challenge lies in quality improvement. He is optimistic that accountable care organizations can deliver savings and suggests that shifting risk downstream to providers throws the health insurance model into question. Finally, looking to the future, Berwick sees a race against time to make American health care more affordable.     

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS); TRICARE program; nonavailability statement requirements--DoD. Final rule

This final rule revises certain requirements and procedures for the TRICARE Program, the purpose of which is to implement a comprehensive managed health care delivery system composed of military medical treatment facilities and CHAMPUS. Issues addressed in this rule include priority for access to care in military treatment facilities and requirements for payment of enrollment fees. This rule also includes provisions revising the requirement that certain beneficiaries obtain a non-availability statement from a military treatment facility commander prior to receiving certain health care services from civilian providers.     

The political management of managed care: explaining variations in state health maintenance organization regulations

In the 1990s, strong incentives for managed care organizations to control costs, once regarded as a fortuitous confluence of interests, came to be seen as antithetical to consumers' interests in quality of care. In response to this change in political climate, many states have greatly increased their regulatory control of managed care organizations since the mid-1990s. This activity is surprising in an era when public policy on health care issues is usually described as frozen, gridlocked, and/or stalemated as a result of intense activity on the part of organized interests. We take advantage of the variation in state regulations of health maintenance organizations (HMOs) to discover why some governments are able to address policy problems that are often perceived as intractable in a political if not in a true policy sense. From the history of HMOs, the backlash against managed care, and state responses to that backlash, we first extract a number of hypotheses about state regulatory activity. We then test these hypotheses with data on regulatory adoptions by states during the late 1990s and the early 2000s. Last, we discuss the findings with special attention to the role of politics in health care.     

The Delta Dental case: "Fair procedure" comes to managed care. Delta Dental Plan of California v. Banasky

All providers contemplating managed care contracts, both individual and institutional, should carefully review the health plans' internal administrative review and dispute resolution procedures before making their decisions, especially if the contracts will represent significant income for the provider. While there may be judicial recourse in California and in other states that adopt the holding in Delta Dental, in other states providers may well be held to the health plans' internal administrative decisions as a matter of contractual agreement. Health plans should also review their own policies and procedures for adequacy under applicable state law. The health care community will not know the full extent of Delta Dental's implications until later cases area decided, but for now it seems certain that another wave of change in this area is just beginning.     

TRICARE; sub-acute care program; uniform skilled nursing facility benefit; home health care benefit; adopting Medicare payment methods for skilled nursing facilities and home health care providers. Final rule

This rule partially implements the TRICARE "sub-acute and long-term care program reform" enacted by Congress in the National Defense Authorization Act for Fiscal Year 2002, specifically: Establishment of "an effective, efficient, and integrated sub-acute care benefits program," with skilled nursing facility (SNF) and home health care benefits modeled after those of the Medicare program; adoption of Medicare payment methods for skilled nursing facility, home health care, and certain other institutional health care providers; adoption of Medicare rules on balance billing of beneficiaries, prohibiting it by institutional providers and limiting it by non-institutional providers; and change in the statutory exclusion of coverage for custodial and domiciliary care.     

Media framing and political advertising in the Patients' Bill of Rights debate

The purpose of this article is to assess the influence of interest groups over news content. In particular, I explore the possibility that political advertising campaigns affect the tenor and framing of newspaper coverage in health policy debates. To do so, I compare newspaper coverage of the Patients' Bill of Rights debate in 1999 in five states that were subject to extensive advertising campaigns with coverage in five comparison states that were not directly exposed to the advocacy campaigns. I find significant differences in coverage depending on the presence or absence of paid advertising campaigns, and conclude that readers were exposed to different perspectives and arguments about managed care regulation if the newspapers they read were published in states targeted by political advertisements. Specifically, newspaper coverage was 17 percent less likely to be supportive of managed care reform in states subject to advertising campaigns designed to foment opposition to the Patients' Bill of Rights. Understanding the ability of organized interests and political actors to successfully promote their preferred issue frames in a dynamic political environment is particularly important in light of the proliferation of interest groups, the prevalence of multimillion-dollar political advertising campaigns, and the health care reform debate under President Barack Obama.     

HIPAA administrative simplification: standard unique health identifier for health care providers. Final rule

This final rule establishes the standard for a unique health identifier for health care providers for use in the health care system and announces the adoption of the National Provider Identifier (NPI) as that standard. It also establishes the implementation specifications for obtaining and using the standard unique health identifier for health care providers. The implementation specifications set the requirements that must be met by "covered entities": Health plans, health care clearinghouses, and those health care providers who transmit any health information in electronic form in connection with a transaction for which the Secretary has adopted a standard (known as "covered health care providers"). Covered entities must use the identifier in connection with standard transactions. The use of the NPI will improve the Medicare and Medicaid programs, and other Federal health programs and private health programs, and the effectiveness and efficiency of the health care industry in general, by simplifying the administration of the health care system and enabling the efficient electronic transmission of certain health information. This final rule implements some of the requirements of the Administrative Simplification subtitle F of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).     

Waiting for Godot: wishes and worries in managed care

Managed care has done a better job at reducing expenditure growth than it has in improving quality. Although reduced expenditure growth is not appreciated by many, it has real benefits. For the majority of Americans who are privately insured, it results in greater disposable income for goods and services other than health care (although the illusion of employer-paid health insurance obscures this reality for many). For Medicaid programs, slower growth of expenditures facilitates efforts at expanding coverage. For low-income workers, slower expenditure growth results in larger numbers of people retaining insurance coverage than would have been the case if premiums rose more quickly. While there are some victories to which managed care organizations can point, we cannot credibly argue that overall levels of quality and health outcomes are improving as the health care system is massively disrupted by changes in health care finance and delivery. The disruptions create real hardships for some physicians and other health care workers, and worries for many consumers. These worries fuel the managed care backlash. The danger is that politicians will respond to these worries with policies that inhibit the development of high-quality delivery systems. The opportunity is for relatively modest public policy changes--external review organizations, better public-sector purchasing capabilities, public investment in producing and publicizing information on health plan and medical group performance, and establishment of a public ombudsperson--to respond to consumer worries and lead to improvements in health care quality and outcomes. Finally, I would be remiss without a reminder that the single most effective action politicians could take to improve health care quality and outcomes would be to change the rules of health care financing to assure that all Americans are covered by managed care. Even with all of its inadequacies, managed care is much superior to the patchwork care available to the 43 million Americans who are uninsured. The managed care backlash is concerned with protecting patients who are insured (and their providers). Far more valuable would be to protect those without insurance. Sadly, no politician has yet figured out how to do this. Still waiting.     

Department of Justice challenging big insurers' "Most Favored Nation" clauses

The DOJ's latest actions suggest that MFNs in managed care contracts should be evaluated on a case-by-case basis, focusing on the actual or potential impact that the MFNs have on price competition among providers and payors in the relevant marketplace. For health care providers desiring to avoid MFNs, however, the DOJ's heightened activity in this area might furnish an appropriate reason to resist such clauses. To date, the DOJ's focus has been on the market power of payors with MFN status. However, the DOJ's reasoning applies equally to providers that wield buying power in contracting with others. Although the DOJ has yet to take up this latter issue, MFNs imposed by increasingly powerful provider organizations can expect to receive similar scrutiny from the DOJ, especially as their market influence grows.     

Medicare Program; establishment of the Medicare+Choice Program--HCFA. Interim final rule with comment period

The Balanced Budget Act of 1997 (BBA) establishes a new Medicare+Choice (M+C) program that significantly expands the health care options available to Medicare beneficiaries. Under this program, eligible individuals may elect to receive Medicare benefits through enrollment in one of an array of private health plan choices beyond the original Medicare program or the plans now available through managed care organizations under section 1876 of the Social Security Act. Among the alternatives that will be available to Medicare beneficiaries are M+C coordinated care plans (including plans offered by health maintenance organizations, preferred provider organizations, and provider-sponsored organizations), M+C "MSA" plans, that is, a combination of a high deductible M+C health insurance plan and a contribution to an M+C medical savings account (MSA), and M+C private fee-for-service plans. The introduction of the M+C program will have a profound effect on Medicare beneficiaries and on the health plans and providers that furnish care. The new provisions of the Medicare statute, set forth as Part C of title XVIII of the Social Security Act, address a wide range of areas, including eligibility and enrollment, benefits and beneficiary protections, quality assurance, participating providers, payments to M+C organizations, premiums, appeals and grievances, and contracting rules. This interim final rule explains and implements these provisions. In addition, we are soliciting letters of intent from organizations that intend to offer M+C MSA plans to Medicare beneficiaries and/or to serve as M+C MSA trustees.     

The failure of community benefit

Though proponents of tax exemption for health care providers continue to extol the virtues of the community-benefit test, Part II of this article illustrates that the train pretty much has already left the station on this front. Both the federal government and the states increasingly look to uncompensated care as the touchstone of exemption for health care providers. To a great extent, this transition back to a "relief of the poor" standard for exemption is the result of the inherent lack of precision in community benefit standards, along with the general trend of empirical evidence that nonprofit health care providers behave similarly to their for-profit counterparts. Faced with this situation, federal and state policymakers naturally have focused on charity care as the one quantifiable behavioral difference to justify exemption. Nevertheless, some empirical evidence suggests that nonprofits may engage in socially desirable behavior other than simply free care for the poor, and the arguments that a mixed ownership system provides the best overall health care model cannot be dismissed out of hand. Thus, despite my past criticisms of the community benefit formulation, I have come to the view that we should seriously consider the options available beyond complete repeal of the community benefit test or a return to a strict charity-care exemption standard. I continue to believe that we should demand a fairly high level of "accountability" from exemption, however, and that exemption should have some direct causal connection to whatever socially-desirable behavior we are seeking. While one option along these lines is to adopt Nina Crimm's approach of rewarding specific behaviors through a deduction or credit system, using "enhancing access" as a test of exemption may provide the best combination of flexibility and verifiable behavioral differences to support continued exemption for health care providers.