The Leadership Breakfast
Toby meets with Ann Stark, the new chief of staff to a top Republican Congressman, and tries to turn a photo opportunity into a substantive meeting on the patient's bill of rights (1) and the minimum wage (2). Leo makes fun of a columnist's shoes, so he sends Sam to make up for it, which only exacerbates the problem. Sam considers moving the press outside out of the West Wing.
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Patient's Bill of Rights (last updated August 14, 2001) (back to top)
The fight over patients' rights is a reaction to the changing nature of American healthcare and a 1974 law that many feel has not kept pace. With about 30 percent of the United States population enrolled in a health-maintenance organization, the patients' rights debate centers on how enrollees in these and other managed-care plans can use the legal system to hold such plans financially accountable for their actions.
Under current federal law, people enrolled in health plans are generally barred from suing managed care organizations and other insurers. Managed-care organizations and other employee benefit plans are strictly regulated by the Department of Labor under the federal Employee Retirement Income Security Act of 1974, and thus are exempt from many state laws; many courts have dismissed lawsuits against HMOs because of this preemption clause, though others have allowed suits based on the quality of care offered, rather than the denial of benefits.
Congress has failed to achieve a workable patients' rights bill in recent years; the House and Senate have both passed different versions but failed to make a compromise. Democrats generally want expansive rights to sue in federal and state courts with few limits on the amount of damages that can be awarded. Republicans, on the other hand, want to limit lawsuits to certain courts and to limit the damages that can be awarded; they say that such lawsuits will hurt other enrollees by forcing costs up.
Other sticking points include whether patients should be required to exhaust rights to administrative appeals and whether employers should be liable if they participate in medical decisions.
While Congress has stalled, patients' rights have moved further in some states. About a fifth of the states now have laws explicitly authorizing suits by enrollees against their managed care organizations, with Texas the first in 1997 (other states include Arizona, California, Georgia, Maine, New Jersey, Oklahoma, Washington and West Virginia). Most states also now have "external review" systems under which people enrolled in a managed-care program can appeal a denial of coverage on medical-necessity and other grounds to a state agency or a state-certified body. Such state measures vary in strength and may be invalidated by a federal patients-rights bill.
All of this debate stems from the changes in the American private health-insurance market since the 1980s. Healthcare costs and private-insurance premiums skyrocketed in the 1980s, and managed-care plans emerged as ways to hold health care providers such as hospitals and doctors more accountable for quality and cost.
Health maintenance organizations, one prominent type of managed-care plan, cut costs by requiring members to deal with a pre-selected network of doctors and hospitals and by reducing the frequency of surgeries, hospital stays, and expensive medications. This helped keep healthcare affordable and within the reach of many people, but also limited the kinds of care one could get and led to the decisions that patients now want to sue over. About 80 million Americans are covered by a HMO plan.
Another 100 million Americans are covered by preferred-provider organizations (PPOs), another form of managed-care plan whereby groups of medical providers that contract directly with employers or health-insurance carriers to provide services to enrollees.
With general agreement that patients should be able to take their MCOs to court, Congress has still failed several times in recent years to reach agreement on just how to enforce these rights. The House and Senate passed conflicting bills in 1999 and 2000 but could not iron out major policy differences.
The same may happen again this year.
In June 2001, the Senate passed by 59-36 a bill sponsored by Senators Edward Kennedy (D-Mass.) and John McCain (R-Airz.) that would allow patients to sue MCOs in state court and also in federal court if the MCO did not exercise "ordinary care" in making its decisions. If successful, patients could win up to $5 million in the equivalent of punitive damages and would have compensatory damages limited only by state law. The bill would also make employers potentially liable if they directly participate in medical decisions that harm patients. President George W. Bush said he would veto a final bill that looked like the Senate bill.
Two months later, in August 2001, the House passed a bill supported by Representative Charles Norwood (R-Ga.) by 225-203; this bill would allow patients to sue MCOs in state court and would limit damages for pain and suffering as well as punitive damages to $1.5 million each, with no limit for economic damages such as lost earning potential.
Ultimately, the House and Senate did not reach a compromise version and any law expanding patients' rights under federal law stalled for a third year in a row.
Sources: Bryan A. Liang, Health Law and Policy: A survival guide to medicolegal issues for practitioners (Butterworth-Heinemann, 2000). Uwe Reinhardt, The Managed-Care Industry in Perspective, available on-line here. The Kaiser Foundation.
Minimum wage (last updated August 14, 2001) (back to top)
By federal law since 1938, most workers must be paid at least a minimum wage under the Fair Labor Standards Act.
This wage was first set at 25 cents per hour with a maximum workweek of 44 hours in order to set a minimum weekly wage of $11, and it banned most child labor. Since 1938, the FLSA has been amended eight times to increase the minimum wage, and increases have also been staggered into these amendments. The following chart shows how the value of the minimum wage (in June 2001 dollars, as adjusted for inflation using the Consumer Price Index) has gone up and down, with a current value of $5.15 an hour and a real-value high in 1968.
Beyond the federal government, many states have enacted their own minimum-wage laws to cover those employers who are exempt from the federal law. Most (28) states simply adopt the federal minimum wage as their own. Ten states (Alaska, California, Connecticut, Delaware, Hawaii, Massachusetts, Oregon, Vermont, and Washington) have a state minimum wage higher than the federal government. Five states (Georgia, Kansas, New Mexico, Ohio and Texas) have a rate lower than the federal government. Seven states have no minimum-wage law at all.
Critics of a minimum wage usually point to microeconomic theory, which shows that a minimum wage - as an imposed floor for wages - will lead to the elimination of jobs that would have existed in a perfect market. But theory does not tell us how many jobs will be lost or whether the overall social benefit outweighs this loss. It depends on how "elastic" the job market is, and whether employers benefit more by not hiring people at the higher wage or by losing the revenue those people would bring in via production or services. In reality, a minimum wage may result in few, if any, low-wage jobs being lost simply because the job market is already so inelastic.
Historically, the enactment of a minimum wage was the culmination of a long-running battle between FDR and the Supreme Court over the New Deal and over a new theory that the government could directly affect and regulate the national economy.
Faced with the Depression, FDR first tried to implement a minimum wage in 1933 with the National Industrial Recovery Act (NRA). Using the NRA, FDR promulgated a President's Reemployment Agreement, so that employers would voluntarily agree to a minimum wage of $12 to $15 a week and would receive a "badge of honor." Patriotic Americans were to buy only from businesses which went along with this voluntary system.
But the Supreme Court weakened the NRA and declared other recovery efforts unconstitutional in a series of decisions that began on "Black Monday," May 2, 1935. That was the day the Supreme Court unanimously invalidated some NRA actions as improperly delegating governmental power to private interests, Schechter Corp. v United States (1935). In a closer 5-4 vote a year later, the Court also declared minimum-wage laws unconstitutional for interfering with workers' liberty of contract, Tipaldo v United States (1936). FDR continued with weaker measures such as the Public Contracts Act of 1936, which required most government contractors to offer a minimum wage, but these did not have widespread effect.
FDR was re-elected to a second term in 1937 with a massive electoral margin. He then proposed to "pack" the Supreme Court by adding up to six new justices, one for each current one who did not retire at age 70. Faced with this threat to the court's institutional independence, Justice Owen Roberts began voting with the four-justice minority from the Tipaldo case in validating new social and economic legislation. This reversal in the direction of the Supreme Court began on March 29, 1937, also known as "White Monday."
That shifted the battle back to Congress. FDR sent the Fair Labor Standards Act and, after a year of debate and adjustments, it finally became law in 1938.
Sources: The Department of Labor's site on the minimum wage is available here.
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