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June 12, 2002

Council opposes bill to legislate 'medical necessity' standard

Health insurers, hospitals, and consumer groups have joined The Business Council in opposing a bill that would radically change health insurance in New York, increase health costs, and raise questions about the quality of health care.

The bill (A.5048-A/Colman, S.2744-A/Stafford) would decree that any treatment or procedure recommended by any physician is "medically necessary," and therefore covered by health insurance, unless there is evidence that the treatments or procedures might be actively harmful. The Council strongly opposes the bill.

To contain runaway health-care costs, most states in the late 1980s and 1990s began moving away from indemnity-based health insurance and towards managed care, said Elliott Shaw, director of government affairs for The Council and its health-care lobbyist.

"The indemnity system encouraged over-utilization resulting in an inflationary health care system," Shaw said. "Equally troubling was the lack of any meaningful quality measurements in the fee-for-service system."

So New York and other states turned to managed care to contain cost increases and measure outcomes more effectively.

As New York's commitment to managed care grew, it crafted comprehensive processes for resolving disputes about when a recommended level of care is medically necessary, Shaw noted.

"This bill would undermine that careful and balanced appeals process," Shaw said. "It would move New York effectively from managed care to 'pre-managed care,' a system in which providers unilaterally decide the type of treatment and the frequency of visits that patients receive, with no balancing controls designed to contain costs."

The results would be economically devastating, he said.

"Medicaid costs would rise. Employers' health-care costs would skyrocket. The costs of health insurance for the state's own workforce would go up. And New York's workers' compensation costs would rise even father above the national average for those costs."

The bill would also encourage alternative treatments of questionable value by promoting a standard that is "too broad and vague, given the explosion in alternative treatments of uneven value," Shaw said.

"This bill reflects good intentions, but it would be a giant step backwards for New York's health-care system," Shaw said.