PATIENT PROTECTION DIES AS SESSION NEARS END

WASHINGTON -- Health care patient protection legislation was taken off life support as Congress finally pulled the plug on the issue in the closing days of the session.

"The fight for the patient's bill of rights is over," Senate Minority Leader Tom Daschle, D-S.D., said after the Senate voted last week to table the legislation.

But as Congress killed patient protection legislation, Sen. Edward Kennedy, D-Mass., in a surprise 11th-hour effort, was attempting to win approval of an amendment to end, in favor of Massachusetts, a heated and potentially nationally significant battle being fought over a state prescription drug mandate.

That battle began in August, when several HMOs in Massachusetts said they would scale back prescription drug benefits next year to Medicare-eligible retirees to help keep coverage affordable.

The Massachusetts Division of Insurance sued one of the HMOs -- Harvard Pilgrim Health Care -- which intended to offer a zero-premium plan with an $800 annual cap on prescription drug benefits. State regulators said such a cutback violated a 1994 Massachusetts law and regulation requiring Medicare HMOs to offer either unlimited or no prescription drug benefits.

The state's HMO industry filed its own suit against the Division of Insurance, saying a 1997 federal law pre-empted the Massachusetts statute. The two suits have been combined into one federal suit and are pending.

Aside from legal action, Massachusetts state politicians sought help in Washington to preserve the drug mandate. Three Massachusetts congressmen introduced a bill in the House to make clear that the state's drug benefit mandate was not pre-empted by federal law, while Sen. Kennedy was preparing a similar amendment to be inserted in a massive federal spending bill or other legislative vehicle. It was not known late last week if Sen. Kennedy's proposal would be accepted by congressional negotiators, though sources said Sen. Kennedy was running into resistance.

On the risk management side, though, legislators in the waning days approved one measure that would require most class-action suits involving nationally traded securities to be tried in federal rather than state court and another bill granting companies some legal protection if they share information about dealing with the Year 2000 computer problem (see related story).

Congress failed to pass financial services modernization legislation sought by insurers and brokers.

The Senate's coup de grace to patient protection legislation came almost exactly a year after momentum for passage of legislation giving health care beneficiaries new rights, such as direct access to certain specialists and expedited claims' review procedures, seemed nearly unstoppable.

At that time, nearly half the members of the House of Representatives signed onto a bill -- considered by business groups as the most extreme of the patient protection bills -- introduced by Rep. Charles Norwood, R-Ga., that would have opened up employers and other health care plan sponsors to suits seeking punitive damages for denial of benefits.

Just before the summer recess, the House approved a more modest bill, an action that appeared to set the stage for a Senate vote.

But the Senate never acted amid a failure among legislators to reach a bipartisan agreement on bringing up a patient protection bill.

That failure, say benefit lobbyists and others, was due to a variety of factors, including:

* The Clinton-Lewinsky scandal. As more and more information about President Clinton's relationship with former White House intern Monica Lewinsky became public, congressional and public attention was diverted away from the patient protection legislation.

"Other events overshadowed this (patient protection legislation) and swallowed it. The dynamics changed. There no longer was a focus on health care issues," said Charles Kahn, chief operating officer and president designate of the Health Insurance Assn. of America in Washington.

"The session began with a scandal and ended with a vote to conduct impeachment hearings. Along the way, many other issues got short shrift," added Frank McArdle, a consultant with Hewitt Associates L.L.C. in Washington.

* A highly effective employer, insurer and HMO-supported lobbying campaign.

"Lobbying really made a difference, especially on liability. It affected Republicans, and many of them pulled back on that issue," Mr. Kahn said.

* Partisan politics. Congressional Democrats, asserts Mr. Kahn, were more interested in politicizing an issue than working with Republicans on a compromise bill.

"The Democrats decided they wanted an issue for the fall elections and not a bill. They took an extreme approach and were not willing to compromise," Mr. Kahn said, referring to Democratic leadership support of expanded liability for health care plans.

While patient protection legislation is dead for this congressional session, it almost certainly will be back on the congressional agenda next year because of continuing public concern over certain managed care plan practices.

"Medical treatment is something that affects all of us. It is a real personal issue and is something that the nation will continue to struggle with," said Henry Saveth, an attorney with William M. Mercer Inc. in Washington.

Another issue certain to be on the congressional agenda next year is problems associated with 1997 legislation, known as Medicare + Choice, that allowed more types of health care plans to compete with Medicare for beneficiaries. The legislation also revamped the payment system the government used to reimburse HMOs for taking over from Medicare the responsibility to provide coverage to beneficiaries.

But the law has not realized its potential. Few new types of health care plans -- such as provider sponsored organizations -- have joined Medicare + Choice. At the same time, HMOs have streamed out of the program in 372 counties of counties, with many of them complaining that the government payment rates are inadequate. The withdrawals affect more than 440,000 Medicare beneficiaries.

HMO executives say that retirees, alarmed by the loss of coverage from HMOs, already are contacting congressmen to voice their worries. And representatives, sensitive to a growing retiree constituency, are likely to listen, some say.

"This is something Congress has to come back to. Older people are very scared" about their benefits, said Nell Hennessy, a senior vp with benefit consultant ASA Inc. in Washington.

Employers with retiree health care plans have a vested interest in the success of the Medicare + Choice program. The need for employers to offer plans supplementing Medicare drops as more retirees opt out of the traditional Medicare program and into Medicare + Choice plans, such as HMOs, that provide benefits beyond what Medicare offers.

Also back on the agenda next year will be a variety of pension reform proposals that were introduced too late in the session to gain serious congressional attention. Those bills, among other things, would cut employer red tape in administering the plans as well as allow employees, in certain situations, to contribute more to their 401(k) and other savings plans.

"There is a feeling that the system needs further simplification," Mr. Saveth said.

Aside from the Medicare + Choice legislation, other benefit proposals approved this session include:

* Allowing employees to make pretax contributions to cover the cost of mass transit expenses, like commuter rail passes.

* Expanding to 30 months from 18 months employers' responsibility to pay the health care expenses of employees who develop end-stage renal disease.

* Extending the tax-favored status of employer-provided educational assistance benefits through May 2000.

* Giving the government up to three years after a health care service was delivered to file suit against employers or others for payments Medicare improperly paid. Those situations typically have occurred when hospitals billed Medicare for services provided to employees age 65 and older for whom employers -- not Medicare -- are the primary payer. This provision had the effect of overturning a federal appeals court decision that gave the government in many cases only a year after a service was delivered to bring a legal action.

Congress also passed a pension simplification package in 1997, which, among other things, allows employers to remove more former employees from their pension rolls. That legislative package allows employers to cash out former employees whose accrued benefits have a present value of up to $5,000, an increase from the previous $3,500 cash-out limit.

In addition, the package repealed a 15% excise tax on pension distributions exceeding approximately $800,000.