Kaiser’s Record of Caring for Poor Assailed : Health: House subcommittee is investigating charges that the HMO has failed to do its fair share. Company denies accusations, blaming them on a contract dispute.


Kaiser Permanente, the nation’s largest health maintenance organization, has come under fire from congressional investigators and California officials who contend it has failed to provide its fair share of health care for the poor.

Kaiser officials deny the charges.

The organization, whose revenues totaled $11 billion in 1992, will be the subject of a hearing today before the House Energy and Commerce Committee’s oversight subcommittee.

At issue is whether Kaiser provides enough care for the poor to justify its nonprofit status. Although there is no precise definition of what constitutes sufficient service to the poor, Kaiser has been criticized by state and federal officials as generally providing too little.


In documents obtained by the committee, California officials criticized what they view as a reluctance on the part of the organization to provide care to people enrolled in Medi-Cal, a program that helps pay medical bills for the poor.

In the Sacramento area, for example, Kaiser has more than 300,000 members but has enrolled only 500 Medi-Cal beneficiaries, officials said. The organization’s agreement to add 5,000 beneficiaries “seems to be insignificant,” according to a letter by Byron Chell, executive director of the California Medical Assistance Commission, which negotiates Medi-Cal contracts.

In contrast, Sutter Omni, a much smaller health care organization that is new to the Sacramento market, agreed to take 45,000 people, and Blue Cross, also smaller than Kaiser, said it would take 40,000 people over two years, Chell said.

The comparisons were contained in a confidential letter sent early this year to Kathleen Hamilton, executive director of the California Health Facilities Financing Authority, which approves bond issues to raise money for medical facilities.

A Kaiser spokesman disputed the charges Wednesday, saying that the organization provides indigent care and has made a commitment to provide more. He suggested that the hearings were motivated by union efforts to put pressure on Kaiser during a contract dispute.

“Many of these union assertions are really outrageous,” said Daniel Danzig, a spokesman at Kaiser’s headquarters in Oakland. Nearly 12,000 employees in Southern California, members of the Service Employees Union, called a one-day strike last month in a dispute over pay. The contract expired April 1.


Kaiser “is willing to provide our fair share,” said Danzig, adding that the organization expects to increase its enrollment of Medi-Cal beneficiaries statewide, now 50,000, to 72,000 by the end of this fiscal year.

In addition, Kaiser provided $105 million in uncompensated care in 1991 to non-members who were patients in its hospitals, including emergency admissions, and will spend $33.5 million in 1993 to subsidize health coverage for low-income patients ineligible for Medi-Cal, he said.

Kaiser owns its hospitals and clinics, and signs contracts with doctors to provide medical services. It pays no federal or state taxes because it is a nonprofit organization.

With President Clinton’s health reform program likely to encourage all Americans to join HMOs, “it’s important to take a careful look at their operations,” a subcommittee source said. The HMOs provide care for a fixed monthly fee and Clinton Administration health planners say the HMOs are able to deliver effective medical care while controlling inflation.

“Kaiser can lead by example by committing to serve those who are now restricted in their access to the health care delivery system,” Chell said in his letter. “Kaiser has been relatively silent as far as this market segment is concerned, and particularly with the Medi-Cal eligible beneficiary population.”

Rep. John Dingell (D-Mich.), the chairman of the full committee and of the oversight subcommittee, has also directed his staff to look into the expansion of Kaiser beyond its California birthplace into other states--Texas, Ohio, Georgia and North Carolina--where it has lost large amounts of money in starting HMO operations.