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104th Congress                                            Rept. 104-865
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 1
_______________________________________________________________________


 
                   PATIENT RIGHT TO KNOW ACT OF 1996

                                _______
                                

               September 28, 1996.--Ordered to be printed

_______________________________________________________________________


  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 2976]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 2976) to prohibit health plans from interfering with 
health care provider communications with their patients, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Rollcall Votes...................................................     4
Committee Oversight Findings.....................................     5
Committee on Government Reform and Oversight.....................     5
New Budget Authority and Tax Expenditures........................     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Inflationary Impact Statement....................................     9
Advisory Committee Statement.....................................     9
Section-by-Section Analysis of the Legislation...................     9
Changes in Existing Law Made by the Bill, as Reported............    10
Additional Views.................................................    11

                               Amendment

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Patient Right To 
Know Act of 1996''.
    (b) Findings.--Congress finds the following:
          (1) Patients cannot make appropriate health care decisions 
        without access to all relevant information relating to those 
        decisions.
          (2) Restrictions on the ability of physicians and other 
        health care providers to provide full disclosure of all 
        relevant information to patients making health care decisions 
        violate the principles of informed consent and the ethical 
        standards of the health care professions. Contractual clauses 
        and other policies that interfere with communications between 
        health care providers and patients can impact the quality of 
        care received by those patients.
          (3) The offering and operation of health plans affects 
        commerce among the States, health care providers located in one 
        State serve patients who reside in other States as well as that 
        State, and, in order to provide for uniform treatment of health 
        care providers and patients among the States, it is necessary 
        to cover health plans operating in one State as well as those 
        operating among the several States.

SEC. 2. PROHIBITION OF INTERFERENCE WITH CERTAIN MEDICAL 
                    COMMUNICATIONS.

    (a) In General.--
          (1) Prohibition of certain provisions.--Subject to subsection 
        (f), an entity offering a health plan (as defined in subsection 
        (d)(2)) may not include any provision that prohibits or 
        restricts any medical communication (as defined in subsection 
        (b)) as part of--
                  (A) a written contract or agreement with a health 
                care provider,
                  (B) a written statement to such a provider, or
                  (C) an oral communication to such a provider.
          (2) Nullification.--Any provision described in paragraph (1) 
        is null and void.
    (b) Medical Communication Defined.--In this section, the term 
``medical communication'' means a communication made by a health care 
provider with a patient of the provider (or the guardian or legal 
representative of such patient) with respect to the patient's physical 
or mental condition or treatment options.
    (c) Enforcement Through Imposition of Civil Money Penalty.--
          (1) In general.--Any entity that violates paragraph (1) of 
        subsection (a) shall be subject to a civil money penalty of up 
        to $25,000 for each violation. No such penalty shall be imposed 
        solely on the basis of an oral communication unless the 
        communication is part of a pattern of such communications or 
        the violation is demonstrated by a preponderance of the 
        evidence.
          (2) Procedures.--The provisions of subsections (c) through 
        (l) of section 1128A of the Social Security Act (42 U.S.C. 
        1320a-7a) shall apply to civil money penalties under paragraph 
        (1) in the same manner as they apply to a penalty or proceeding 
        under section 1128A(a) of such Act.
    (d) Definitions.--For purposes of this section:
          (1) Health care provider.--The term ``health care provider'' 
        means anyone licensed under State law to provide health care 
        services.
          (2) Health plan.--The term ``health plan'' means any public 
        or private health plan or arrangement (including an employee 
        welfare benefit plan) which provides, or pays the cost of, 
        health benefits, and includes an organization of health care 
        providers that furnishes health services under a contract or 
        agreement with such a plan.
          (3) Coverage of third party administrators.--In the case of a 
        health plan that is an employee welfare benefit plan (as 
        defined in section 3(1) of the Employee Retirement Income 
        Security Act of 1974), any third party administrator or other 
        person with responsibility for contracts with health care 
        providers under the plan shall be considered, for purposes of 
        this section, to be an entity offering such health plan.
    (e) Non-Preemption of State Law.--A State may establish or enforce 
requirements with respect to the subject matter of this section, but 
only if such requirements are more protective of medical communications 
than the requirements established under this section.
    (f) Construction.--Nothing in this section shall be construed as 
preventing an entity from--
          (1) acting on information relating to the provision of (or 
        failure to provide) treatment to a patient; or
          (2) restricting a medical communication that recommends one 
        health plan over another health plan if the the sole purpose of 
        the communication is to secure financial gain for the health 
        care provider.
    (g) Effective Date.--Subsection (a) shall take effect 90 days after 
the date of the enactment of this Act and shall apply to medical 
communications made on or after such date.

                          Purpose and Summary

    The purpose of H.R. 2976, the Patient Right to Know Act of 
1996, is to prevent health plans from interfering in medical 
communications between patients and their health care 
providers. The bill provides that a health plan may not include 
in a written contract with a provider, a written statement to a 
provider, or an oral communication with a provider, a provision 
that prohibits or restricts any medical communication. The bill 
declares such provisions null and void.

                  Background and Need for Legislation

    As health care costs have risen and the need for more cost-
conscious health care has grown, health insurers and employers 
have increasingly adopted principles of managed care. 
Currently, approximately 135 million Americans are enrolled in 
some form of managed care. This represents approximately 50.7 
percent of the insured population. Managed care has been 
defined as any type of intervention in the provision of health 
care services or reimbursement of health care providers that is 
intended to provide health care services in the most efficient 
manner. Managed care is a broad concept that encompasses 
several different types of entities, such as: (1) Health 
Maintenance Organizations (HMOs); (2) Independent Practice 
Associations (IPAs); (3) Point of Service plans (POSs); and (4) 
Preferred Provider Networks (PPNs). Fee-for-service plans are 
also employing many of the same cost-saving mechanisms. Managed 
care represents an important component of the market and in 
many cases promotes good health and results in lower overall 
health care expenditures.
    Recently, a number of reports from both patients and 
providers have expressed concern that some health plans may 
have pursued too vigorously cost-saving mechanisms by taking 
steps to limit doctor-patient communications. This is troubling 
because open communications are critical to quality care. 
Patients need all relevant information about their physical and 
mental conditions and their treatment options to make 
intelligent choices about their care. Any effort to constrain 
patients from receiving the necessary facts makes it very 
difficult for them to give informed consent.
    During the Subcommittee on Health and Environment hearing, 
the Subcommittee heard from several witnesses who outlined ways 
in which some health plans have attempted to interfere in 
medical communications between patients and their health care 
providers. Testimony came from doctors who were threatened with 
retaliatory action for providing their patients with certain 
treatment information. The Subcommittee also heard from two 
widowers who alleged that plan interference led to delays in 
receiving critical information which led to their wives' 
deaths. These physicians and patients whole-heartedly supported 
H.R. 2976.
    The Subcommittee also heard from several managed care plans 
which all stated that they expect free and open communication 
between physicians and patients. They also pointed out that 
managed care requires accountability, coordination, and 
communication. While these witnesses were supportive of the 
goals of H.R. 2976, they expressed several concerns about the 
specifics of the legislation.
    The bill, as reported by the Committee, represents an 
attempt to find a compromise that addresses the concerns of 
consumers and providers without imposing unacceptable burdens 
on health insurers.

                                Hearings

    The Subcommittee on Health and Environment held a hearing 
on Contract Issues and Quality Standards for Managed Care on 
May 30, 1996. Testimony was received from the following 
witnesses: Dr. Michael Haugh, Tulsa, Oklahoma; Dr. Steve Buie, 
Kansas City, Missouri; Dr. John M. Ludden, Senior Vice 
President for Medical Affairs, Harvard Pilgrim Health Care; Dr. 
William J. Osheroff, Medical Director, Western Region, 
PacifiCare of California; Dr. Robert E. McAfee, Immediate Past 
President, American Medical Association; Ms. Karen Ignagni, 
President and CEO, American Association of Health Plans; Mr. 
David Ching, Fremont, California; Ms. Diane Martello, North 
Tarrytown, New York; Mr. Alan Charles deMeurers, Keizer, 
Oregon; Mr. Alfred Couture, Worcester, Massachusetts; Dr. 
Raymond Scalettar, Consultant, Joint Commission on 
Accreditation of Health Care Organizations; Dr. Spencer Falcon, 
Senior Vice President, National Services and Managed Care, Blue 
Cross and Blue Shield of Michigan; Dr. William S. Ten Pas, 
President, American Dental Association; Ms. Lauren Hirsch, 
Wantagh, New York; Dr. Linda Peeno, founder, The CARE 
Foundation; Mr. Mark Cloutier, MPH, MPP, Vice President, 
Bioethics Consultation Group; Ms. Heather Fraser, representing 
the Cystic Fibrosis Foundation; and Mr. Val D. Bias, 
representing the Patient Access to Specialty Care Coalition.
    Although the hearing addressed many issues, the focus of 
the hearing was the issue of ``gag rules'' in managed care 
plans and whether legislation was necessary to address the 
issue.

                        Committee Consideration

    On June 27, 1996, the Subcommittee on Health and 
Environment met in open markup session and approved H.R. 2976, 
the Patient Right to Know Act of 1996, for Full Committee 
consideration, as amended, by a rollcall vote of 22 yeas to 0 
nays.
    On July 24, 1996, the Full Committee met in open markup 
session and ordered H.R. 2976 reported to the House, as 
amended, by a voice vote.

                             Rollcall Votes

    Clause 2(l)(2)(B) of rule XI of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report legislation and amendments 
thereto. There were no recorded votes taken in connection with 
ordering H.R. 2976 reported. A motion by Mr. Bilirakis to order 
H.R. 2976 reported to the House, as amended, was agreed to by a 
voice vote, a quorum being present.

                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of 
the House of Representatives, the Committee held an oversight 
hearing and made findings that are reflected in this report.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

               New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that H.R. 2976 would result in no new or increased budget 
authority or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 403 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of rule XI of the Rules of 
the House of Representatives, the following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 403 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 1, 1996.
Hon. Thomas J. Bliley, Jr.,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has reviewed H.R. 2976, the Patient Right to Know Act of 1996, 
as ordered reported by the House Committee on Commerce on July 
24, 1996. Enclosed are CBO's federal cost estimate and 
estimates of the costs of intergovernmental and private-sector 
mandates.
    Enactment of the bill would direct spending and thus would 
be subject to pay-as-you-go procedures under Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985.
    If you wish further details on these estimates, we will be 
pleased to provide them. The CBO staff contacts are identified 
in the separate estimates.
            Sincerely,
                                         June E. O'Neill, Director.

           congressional budget office federal cost estimate

    1. Bill number: H.R. 2976
    2. Bill title: Patient Right to Know Act of 1996
    3. Bill status: As ordered reported by the House Committee 
on Commerce on July 24, 1996.
    4. Bill purpose: H.R. 2976 would require health plans to 
refrain from any activity that restricted or prohibited 
providers' communications with patients concerning their health 
conditions or treatment options.
    5. Estimated cost to the Federal Government: CBO and the 
Joint Committee on Taxation (JCT) estimate that H.R. 2976 would 
increase the federal deficit by about $90 million between 1997 
and 2002 (see attached table). As a result of increases in 
employer-paid health premiums, federal income and payroll tax 
revenues would fall by about $70 million over that period. 
Federal outlays for Medicaid would increase by $13 million, and 
mandatory outlays for federal employees' health benefits would 
increase by $8 million over the period. Discretionary spending 
for benefits of active federal workers would rise by another $8 
million, and the Secretary of Health and Human Services would 
be required to undertake enforcement actions that would imply 
additional costs, assuming appropriation of the necessary 
amounts.
    6. Basis of the estimate:
    Gag rules.--H.R. 2976 would prohibit certain types of so-
called gag rules, under which health plans restrict providers 
from discussing certain, presumably expensive, treatments with 
patients. The elimination of such restrictions could enable 
some health care providers to discuss treatment options with 
their patients more freely than at present, thereby allowing 
those patients to make more informed choices. By limiting one 
of the mechanisms by which health plans may control 
expenditures, H.R. 2976 would raise the cost of some of those 
plans. Their costs would rise if, as a result of more open 
communications between providers and patients about treatment 
options, the providers in their network performed more high-
cost procedures or referrals.
    For several reasons, however, the cost increases incurred 
by plans from the elimination of gag rules would be small:
          CBO assumes that rules restricting communications 
        about medical treatment options are not commonly used 
        by health plans.
          Some states have enacted anti-gag-rule legislation 
        and others have such legislation under consideration. 
        (Self-insured plans, however, would not be covered by 
        state laws but would be covered under H.R. 2976.)
          H.R. 2976 would not require health plans to provide 
        more services than they do now.
          The financial incentives for physicians and other 
        providers in health plans would be unchanged.
    Protocols, guidelines, and quality control.--Although the 
bill would not explicitly impose new restrictions on 
utilization review procedures or on other actions that plans 
could take to limit the use of high cost procedures, the 
prohibition on the restriction of medical communications is 
sufficiently broad that the bill might prevent health plans 
from imposing any requirements on medical communications. 
Depending on how courts interpreted the bill and on the level 
of enforcement performed by the Secretary of Health and Human 
Services, this limitation could be more important--and costly--
than the prohibition of gag rules alone.
    Although H.R. 2976 does not directly address protocols and 
treatment guidelines, CBO assumes that the bill would make 
plans more cautions about implementing them. Such protocols 
would be seen as indirectly restricting provider-patient 
communications concerning treatment options by recommending 
certain treatments to the exclusion of others. The Blue Cross 
and Blues Shield Association has argued that H.R. 2976 could 
disrupt some standard quality control functions of plans, 
including, for example, the ability of plans to restrict 
certain providers from making referrals or to enforce 
limitations on the scope of practice of certain providers.
    Effect on Federal revenues.--Any law that imposes 
additional requirements on health plans will tend to increase 
the costs of those plans. Because H.R. 2976 could potentially 
disrupt some quality control efforts and inhibit the 
development of treatment protocols. CBO assumes that enactment 
of the bill would initially result in a slight increase in 
private health insurance premiums--about 0.025 percent. This 
figure is highly uncertain; the actual increase would depend on 
the method and intensity of the Secretary's enforcement efforts 
and on the interpretations of the law in the courts. Because 
the bill is broadly worded, it has the potential to affect 
plans' ability to control their costs in unintended and 
unforeseen ways.
    Employers and employees would offset part of the premium 
increase by reducing coverage, or by dropping benefits for 
other services. Because of these reactions, we assume that 
employer contributions for health insurance would rise by only 
0.01 percent. Most of that increase would be passed back to 
employees in lower wages. The lower wages, in turn, would 
reduce federal income and payroll tax revenues, JCT estimates 
that revenues would fall by about $70 million between 1997 and 
2002.
    Effect on Federal outlays.--CBO estimates that the federal 
share of increased Medicaid costs implied by H.R. 2976 would 
total about $13 million over the period. Although the bill's 
requirements would not necessarily apply to Medicaid as a 
direct payer, plans contracting to provide care to Medicaid 
recipients would be affected.
    Federal costs for federal employees' health benefits would 
also increase slightly. Direct spending for annuitants' 
benefits would rise by about $8 million over the period, and 
discretionary spending for active workers would rise by another 
$8 million, assuming the necessary amounts were appropriated.
    Several federal agencies--including the Departments of 
Health and Human Services, Labor, and Justice--would incur the 
costs of enforcing this bill. CBO cannot estimate the magnitude 
of these costs.
    7. Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 sets up pay-as-you go 
procedures for legislation affecting direct spending or 
receipts through 1998. The bill would have the following pay-
as-you-go impact:

                [By fiscal year, in millions of dollars]                
------------------------------------------------------------------------
                                                 1996     1997     1998 
------------------------------------------------------------------------
Change in Outlays............................        0        2        3
Change in Revenues...........................        0       -7      -11
------------------------------------------------------------------------

    8. Estimated impact on State, local, and tribal 
governments:
    Intergovernmental mandates.--H.R. 2976 would impose an 
intergovernmental mandate, as defined in the Unfunded Mandates 
Reform Act of 1995 (Public Law 104-4), because state and local 
governments, as sponsors of health plans for their employees, 
would be prohibited from using a particular mechanism to 
control costs. CBO estimates that the bill would increase the 
cost of health insurance for employees of state and local 
government by $10 million annually, a 0.025 percent increase.
    The cost would be borne primarily by the employees 
themselves and not by state and local taxpayers. Economists 
generally believe, and CBO's cost estimates have long assumed, 
that workers as a group bear most of the cost of employers' 
health insurance premiums. The primary reason for this 
conclusion is that the supply of labor is relatively 
insensitive to changes in take-home wages. Because most workers 
continue to work even if their take-home pay declines, 
employers have little trouble shifting most the cost of 
additional health insurance to workers' wages or other fringe 
benefits. The amount of total compensation paid by state and 
local governments would thus remain unchanged in the long run. 
However, during a transition period of about two years, state 
and local governments would have to spend between $1 million 
and $2 million annually because about 40 percent of their 
employees are covered by collective bargaining agreements that, 
on average, last for two years. Such agreements would prevent 
state and local governments from changing other elements of 
these employees' compensation packages until the collective 
bargaining agreements expire.
    Other impacts.--The bill would also increase state Medicaid 
costs by $1 million to $2 million annually. Even though the 
bill's requirements would not necessarily apply to Medicaid as 
a direct payer, plans contracting to provide care to Medicaid 
recipients would be affected. The increase in cutting back on 
optional services and beneficiaries. Under Public Law 104-4, an 
increase in program costs for a large entitlement, such as 
Medicaid, is not a mandate if states have such flexibility to 
reduce their own financial or programmatic costs.
    9. Estimated impact on the private sector: H.R. 2976 would 
impose a mandate on health plans in the private sector by 
prohibiting them from restraining certain types of 
communications between providers and patients. Under the bill, 
plans could not restrict providers' communications with 
patients concerning their physical or mental conditions or 
their treatment options. Health plans that violated this 
requirement would face civil money penalties.
    By limiting one of the mechanisms through which managed 
care plans may control expenditures, H.R. 2976 would raise the 
costs of some of those plans. Their costs would rise if, as a 
result of more open communications between providers and 
patients about treatment options, the providers in their 
network performed more high-cost procedures or made more 
referrals. For reasons given above, however, CBO assumes that 
the direct costs on the private sector would be small and would 
not exceed the $100 million annual threshold.
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Jeff Lemieux (private insurance 
and federal employees' health benefits) and Jean Hearne 
(Medicaid); Linda Bilheimer (private sector) and John Patterson 
(state and local government).
    12. Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                                H.R. 2976, THE PATIENT RIGHT TO KNOW ACT OF 1996                                
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                   1997     1998     1999     2000     2001     2002   1997-2002
----------------------------------------------------------------------------------------------------------------
                                          DIRECT SPENDING AND RECEIPTS                                          
Outlays:                                                                                                        
    Medicaid...................................        2        2        2        2        2        3        13 
    Federal Employees Health Benefits..........        0        1        1        2        2        2         8 
                                                ----------------------------------------------------------------
      Total, Outlays...........................        2        3        3        4        4        5        21 
Revenues:                                                                                                       
    Income and Payroll Taxes...................       -7      -11      -11      -12      -14      -15       -70 
    Deficit....................................        9       14       14       16       18       20        91 
                                                                                                                
                                        SPENDING SUBJECT TO APPROPRIATION                                       
Federal Employees Health Benefits:                                                                              
    Budget Authority...........................        0        1        1        2        2        2         8 
    Outlays....................................        0        1        1        2        2        2         8 
Enforcement by Department of Health and Human                                                                   
 Services and other Agencies:                                                                                   
    Budget Authority...........................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)     (\1\) 
    Outlays....................................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  
----------------------------------------------------------------------------------------------------------------
 \1\ Not estimated.                                                                                             
                                                                                                                
Sources: Congressional Budget Office, Joint Committee on Taxation.                                              

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that H.R. 2976 
would have no inflationary impact.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act are created by this 
legislation.

             Section-by-Section Analysis of the Legislation

Section 1. Short title; findings

    Section 1 contains the short title which is the Patient 
Right to Know Act of 1996. The section also contains findings 
regarding the importance of communications between providers 
and their patients.

Section 2. Prohibition of interference with certain medical 
        communications

    Section 2 provides that an entity offering a health plan 
may not prohibit or restrict any medical communication as part 
of: (a) a written contract or agreement with a health care 
provider; (b) a written statement to such provider; or (c) an 
oral communication to the provider. Section 2 provides that 
such provisions are null and void. The section defines the term 
``medical communication'' to mean a communication by a health 
care provider with his or her patient with respect to the 
patient's physical or mental condition or treatment options.
    Section 2 also provides for an enforcement mechanism for a 
violation of this section. The bill provides for civil money 
penalties of up to $25,000 for violations. In addition, it 
provides that no penalty shall be imposed solely on the basis 
of an oral communication unless it is a part of a pattern of 
such communications or the violation is demonstrated by a 
preponderance of the evidence. This is intended to establish a 
complaint-based system of enforcement, not one based on 
mandatory prior review of provider contracts, Federal 
participation in the contracting process, or ongoing monitoring 
of plan operations and communications. Civil money penalties 
are the only remedy provided by the bill.
    A State is permitted to establish requirements regarding 
the interference with medical communications that are more 
protective of these communications. The bill also clarifies 
that nothing shall be construed as preventing a plan from (a) 
acting on information relating to the provision of (or failure 
to provide) treatment or (b) restricting medical communications 
that recommend one plan over another solely for the provider's 
financial gain.
    Nothing in this Act is intended to modify, alter, or amend 
Section 514 of the Employee Retirement Income Security Act of 
1974 (ERISA).

         changes in existing law made by the bill, as reported

    This legislation does not amend any existing Federal 
statute.
                            ADDITIONAL VIEWS

    During a lengthy hearing on May 30, 1996, we heard from 
several witnesses who outlined the ways in which some health 
plans have attempted to interfere in medical communications 
between patients and their health care providers. Testimony 
came from doctors who were threatened with retaliatory actions 
for telling their patients information that the health plan did 
not want them to know. We also heard from two widowers who 
learned too late critical information about their wives' health 
care.
    We have grave concerns that some--but certainly not all--
health plans are attempting to interfere in the doctor-patient 
relationship. The trust between a patient and his or her health 
care provider is at the core of the medical profession and is 
central to the notion of informed consent. To make intelligent 
decisions about their health care, consumers must be informed 
of all of their treatment options--not just those that plan 
wants them to know about or is willing to pay for.
    At the same time, we recognize that the health care market 
is undergoing rapid and often unpredictable changes. Managed 
care represents an important component of the market and its 
advocates believe that active case management can help promote 
good health and thereby result in lower overall health care 
expenditures. Such networks cannot thrive, however, if they are 
unable to monitor and prevent unnecessary utilization of 
services and to engage in active management of the care of 
enrollees.
    Based on the testimony at the hearing as well as other 
reports, we agree that legislation is needed to prevent outside 
interference in communications between patients and their 
health care providers. At the same time, there was some 
disagreement as to whether the original text of H.R. 2976 would 
pose unacceptable burdens on health insurers.
    In an effort to find a compromise that would address the 
very real concerns of consumer groups and health care providers 
without undermining the health care markets, we worked 
diligently to find a compromise that would meet these two 
important, but somewhat conflicting goals.
    Shortly before the Health and Environment Subcommittee met 
to consider the legislation, we drafted a substitute that made 
a number of important changes to the base text. While we do not 
believe the substitute is perfect (some of us would like to see 
a stronger bill, others think it may unduly restrict legitimate 
activities of health insurers), it represents a true compromise 
which is a delicate balance of competing ideas and 
philosophies.
    The substitute was ordered reported to the Full Committee 
by a 22-0 vote and was approved by voice vote by the Full 
Commerce Committee a month later.
    We think it is appropriate to discuss the major changes to 
H.R. 2976 made by the substitute and the reasons for them:
    1. First and foremost, the substitute is more narrowly 
focussed on protecting provider-patient communications. The 
base bill would have also placed restrictions on the ability of 
health plans to regulate communications between providers and 
the plan and between providers and state and federal 
regulators. Significant questions were raised about possible 
unintended consequences of these provisions, and the substitute 
deletes them and focusses on protecting the ability of patients 
to freely communicate with their health care providers.
    2. The original bill contained a long definition of what is 
included as a protected medical communication. While we agree 
on what this should mean, there was some concern about the 
wisdom of placing that definition in legislative language. 
Instead, the substitute expressly states that a `` `medical 
communication' means a communication made by a health care 
provider with a patient of the provider (or the guardian or 
legal representative of such patient) with respect to the 
patient's physical or mental condition or treatment options.''
    During the Subcommittee mark-up, Congressman Burr and 
Congressman Ganske had an exchange in which they discussed how 
broadly this term should be interpreted. The key elements of 
that discussion are as follows:

          Mr. Ganske: * * * it is my intention that the 
        substitute would cover any tests, consultations, and 
        treatment options; any risks or benefits associated 
        with them; and any variation in quality among health 
        care providers and any institutions providing such 
        services. Medical communications also covers general 
        descriptions of the standard used by plans to decide 
        whether to authorize health care services; the process 
        used by the plan to make those decisions; and a general 
        description of financial incentives or disincentives 
        provided by such an entity that may be based on service 
        utilization.
          Mr. Burr: I am concerned about the ability of plans 
        to safeguard proprietary data. While I do understand 
        the desire to provide patients with access to 
        information on utilization review procedures and 
        financial incentives, I would not support a provision 
        that forced plans to permit the disclosure of specific 
        fee schedules.
          Mr. Ganske: A patient has a right to know the general 
        way his policy works [and I] would be pleased to work 
        with you and with Chairman Bliley to craft report 
        language consistent with that need and also with the 
        ability of plans to compete in the marketplace.

    We believe that this reading of the substitute is 
appropriate. We met with several experts who were concerned 
that the original bill would result in the disclosure of 
confidential information and other trade secrets of health 
plans. We recognize that the health care market is very 
competitive and that plans have a legitimate interest in 
protecting proprietary data such as payment schedules.
    But that does not mean that plans should be able to prevent 
providers from discussing the general nature of plan operations 
with their patients. The subject of provider compensation most 
squarely presents this issue. Health plans are paying their 
providers in new and innovative ways. Some pay a straight 
salary. Others pay a form of fee schedule, which pays providers 
for each service delivered. Some plans capitate their 
providers, meaning that they are paid a flat fee per patient 
but may be personally financially liable for a certain amount 
of care provided. Many plans use other, more innovative, 
payment systems which tie a provider's pay to some performance 
measurements--generally in the form of bonuses and withholds.
    We do believe that patients ought to have access to 
descriptive information about the way in which their provider 
is paid. The testimony from David Ching demonstrates the 
importance of this information. His wife complained of severe 
abdominal pain and rectal bleeding. Her doctor repeatedly 
refused her requests for additional tests and referrals to 
specialists. After a delay of several months, she was finally 
referred to a specialists who diagnosed her with the colon 
cancer that had recently perforated her bowel wall and resulted 
in her early death.
    What Joyce and David Ching did not know is that her doctor 
had a financial interest in providing her with less health 
care. He was paid $27 per month to care for her, and was 
personally responsible for the first $10,000 of care provided. 
After her first visit and a barium enema, Joyce Ching had cost 
her doctor his entire annual capitation. Further tests and 
referrals would effectively come out of his pocket. David Ching 
testified that had he known about that compensation 
arrangement, he definitely would have sought a second opinion 
for his wife out of his own pocket.
    It is important to note that the compromise approved by the 
Committee would not require plans to allow discussions of the 
specific dollar amounts of financial arrangements. But Joyce 
Ching's case points out the very real dangers created when 
patients do not have complete access to information about their 
health care needs.
    While we believe that providers should be able to fully 
inform patients as to their physical or mental condition and 
treatment options, the utilization review procedures 
established by health plans, and the general manner in which 
providers are compensated, we also believe that health plans 
should be able to establish utilization review procedures as 
well as quality guidelines, and that plans are not required to 
allow discussions of the specific dollar amounts of financial 
arrangements.
    While we believe that patients can make informed decisions 
without knowing the specific dollar amounts involved in these 
payment arrangements, knowing the general manner in which their 
provider is compensated could be important. Accordingly, we do 
not believe health plans should be able to prevent providers 
from describing the general nature of these arrangements and 
how they could create incentives or disincentives for the 
delivery of additional care. For example, a provider could tell 
a patient, ``I receive a flat fee per month from the plan and I 
can also qualify for certain bonuses if the amount of care I 
provide during the year falls below a certain level'' or 
``Because of my compensation arrangement with the plan, my 
salary decreases if I refer patients to too many specialists.'' 
Plans wishing to restrict the disclosure of specific dollar 
amounts in these arrangements should be able to do so, but the 
type of general information described above should not be 
considered to be proprietary data or a trade secret.
    3. The original bill listed a series of ``adverse actions'' 
that health plans would be prohibited from taking. This placed 
the focus on whether the plan took any action against the 
provider, not whether patients had access to all the 
information they need. To keep the focus on preventing 
restrictions on medical communications, the substitute deleted 
the list of ``adverse actions.'' Plans that attempt to prohibit 
or restrict free communications between providers and 
patients--whether in written policies or expressed orally--
would be in violation of the law, even if they have taken no 
retaliatory actions.
    For example, a plan could not tell providers not to discuss 
the possibility of bone marrow transplants with patients and 
threaten to terminate the contracts of those who disobey. The 
action of making the attempt to restrict the medical 
communication would be a violation of law, regardless of 
whether the plan actually took any action against non-complying 
providers. The substitute keeps the focus on whether the health 
plan is trying to place a prohibition or restriction on medical 
communications, not how the plan attempts to enforce those 
restrictions.
    4. The substitute limited the civil money penalties that 
can be levied against health plans found in violation of the 
plan. The substitute retained the fine of up to $25,000 per 
violation but deleted a provision to create a $100,000 fine for 
repeated violations. Both the base text and the substitute 
declare restrictions on medical communications to be ``null and 
void.''
    5. The substitute includes a provision that makes clear 
that providers may not use the protections in this bill solely 
for the purpose of steering patients into a competing health 
plan which pays them better. During the Subcommittee hearing, 
some witnesses expressed the concern that health care providers 
will use this legislation as a shield to encourage patients to 
join health plans which provide them a higher reimbursement. To 
prevent this, the substitute allows health plans to restrict a 
medical communication that ``recommends one health plan over 
another plan if the sole purpose of the communication is to 
secure financial gain for the health care provider.''
    6. The substitute moves the bill's effective date back from 
30 days to 90 days after enactment. This was done in response 
to concerns that 30 days was not enough time for health plans 
to amend hundreds of contracts and policy bulletins.
    The amended effective date provision also makes clear that 
the enforcement provisions do not apply to medical 
communications made before that date. The base text could have 
been interpreted to create liability for restrictions on 
medical communications made before the date of enactment. The 
substitute clarifies this point.
    7. We recognize that restrictions on medical communications 
could take several forms. While public attention has focussed 
on ``gag rules'' in plan contracts, restrictions also appear in 
health plan policy bulletins and letters and have been orally 
conveyed to providers.
    We are concerned that the standard of proof be high enough 
to ensure that health plans are not subjected to numerous 
claims of oral gags that degenerate into ``he said-she said'' 
arguments. The standard of proof for oral communications should 
be high enough to provide health plans with some degree of 
assurance that they will not be found to have violated the bill 
every time a provider makes an unsupported claim without any 
support or corroboration.
    To address this issue, the substitute requires that 
allegations of a single instance of an oral restriction on 
communications be proved by a ``preponderance of the 
evidence.'' This is a higher standard than the ``substantial 
evidence'' test and is designed to permit the Secretary of 
Health and Human Services to more easily weed out baseless 
allegations.

                                   Greg Ganske.
                                   Richard Burr.
                                   John D. Dingell.
                                   Ed Markey.
                                   Charlie Norwood.
                                   Henry A. Waxman.
           ADDITIONAL VIEWS OF THE HONORABLE CHARLIE NORWOOD

    As a cosponsor of H.R. 2976, the ``Patient Right to Know 
Act,'' I want to applaud Messrs. Ganske and Markey for their 
work on ensuring that health plan enrollees are protected in 
this age of managed care.
    As a former health care provider, I had an interest in 
doing what was best for the patients with whose health I was 
entrusted. I believe all health providers have that interest 
and that mandate. That mandate includes guaranteeing that their 
patients have access to all relevant information they need to 
make informed medical decisions. That includes information 
regarding treatment options and diagnoses and whether or not 
they have access to that treatment. Patients also have a right 
to know whether a provider has a financial incentive to limit 
or deny care to their patients. No health provider who has 
taken an oath to protect those they serve should be prevented 
from giving their patients the most information available about 
their medical condition or treatment options. To that extent, I 
am pleased that the House Commerce Committee passed H.R. 2976.
    At the same time, there are other, equally severe problems 
that patients must confront when dealing with managed care 
organizations. Part of what makes managed care so effective is 
their use of contractual provisions to limit utilization of 
health care. In the case of overutilization of unnecessary 
health services, utilization reviews can be good. However, when 
someone needs emergency health care or care from a specialist, 
utilization reviews can be counterproductive. Even more, it 
endangers those who rely on complete and adequate health care 
from their plans.
    It is my strong belief that Congress has an obligation to 
ensure that those who rely on their health plans for needed and 
adequate care should be protected from those companies with a 
profit motive to limit access to needed health care treatments. 
Controlling health care costs is necessary--controlling or 
otherwise limiting needed care in unacceptable. That is why I 
have introduced H.R. 2400, the Family Health Care Fairness Act, 
to ensure that patients are guaranteed adequate health care 
from their health plans.
    Many states, including my own, have passed legislation to 
ensure that the health and well being of patients in managed 
care plans are protected. If this problem did not exist, we 
would not see the proliferation of these and other measures at 
the state and Federal level. Even more, the Commerce Health and 
Environment Subcommittee would not have heard testimony 
regarding the devastation that ``gag rules'' have wreaked on 
families. Given that, I fully support measures insuring that 
patients have access to the information they need to make 
informed decisions. H.R. 2976 and H.R. 2400 move to that end.

                                                   Charlie Norwood.