COLUMN ONE : A Mixed Diagnosis for HMOs : They strongly deny rationing care, but Times study finds they withhold some services from sicker patients solely because of high costs. Still, 92% of members like the health plans overall, poll finds.


Scarcely a year ago, health reform in America was declared dead. The Clinton Administration’s reform package, two years in the making, was buried by Congress in a matter of months. Americans, it was said, were not ready for a health care revolution.

But for millions of Californians, the revolution is here.

It is called managed care, and it has advanced faster and further here than in any other state in the union, radically transforming the practice of medicine and patients’ relationships with their physicians.

For the vast majority of patients, the change has been positive. Although members of health maintenance organizations and other managed care plans must accept restrictions on their choice of doctors, they pay less for routine treatment than they would under the traditional fee-for-service system. Their overall premiums are lower too, by as much as 20%.


Indeed, by some measures, HMOs have slowed--or reversed--the trend that saw overall health care costs spiraling upward at double-digit rates annually.

But these changes have come at a price--a price paid by sicker patients, those with complicated or hard-to-diagnose conditions and the chronically ill.

In a seven-month investigation, The Times found that HMOs in California withhold some services from these patients for no other reason than that they are expensive.

Put another way, with little public debate and scant government oversight, the state’s HMOs--squeezed by employers to cut costs--are rationing health care to Californians.


The result is clear to those familiar with the system, even if the methods can be obscure.

“Managed care works when routine or preventive care is indicated or when a simple diagnosis can be made,” said Margaret Williams, the director of benefits at a major law firm on Los Angeles’ Westside. “But it fails miserably when it tries to address more serious or chronic conditions.”

HMOs commit themselves to providing all “medically necessary” care for their members. Most major HMOs in the state offer prospective customers book-length rosters of doctors, medical groups and hospitals, and they pledge that any covered services not available through a member’s chosen care-givers will be provided by the organization.

But listen to patients, doctors and other medical professionals--read their court testimony and the letters, faxes and e-mail messages that arrived by the hundreds when The Times solicited Californians’ stories about HMO care--and you will know that the health plans frequently fall short of this ideal. Many California HMOs save money not only by squeezing inefficiencies out of the system, but also by refusing needed care, either overtly or indirectly.

Patients who could benefit from the attention of specialists have been forced to accept “next-best” treatment from doctors not fully qualified in the appropriate field. A urologist is assigned to perform an operation better handled by a specialist in kidney cancers--with the result that a tumor is punctured, worsening the patient’s condition. Specialists from cardiologists to dermatologists complain that primary care physicians are being asked to do too much, with the result that potentially cancerous lesions, alarming heart conditions and other early warning signs are being missed.

What Is ‘Necessary’?

In most cases, HMOs themselves are the final authority for determining a treatment’s medical necessity--decisions they may make to their own advantage. Is reconstructive surgery for a child born with a facial deformity merely cosmetic, as some HMOs contend? Or is it medically necessary to spare the child a lifetime of embarrassment and ridicule?

These are questions that Dr. Henry K. Kawamoto Jr., a clinical professor of plastic surgery at UCLA Medical Center, debates endlessly with HMOs hostile to paying for such care.


“This is almost an ongoing, daily thing for children born with congenital deformities,” he says. “Someone once said it is the divine right of people to look human, especially if it’s beyond the child’s control.”

Then there is the “hassle factor,” an aspect of HMOs--and the medical groups they contract with--that frustrates many who are otherwise satisfied with their care. Patients needing critical treatment navigate a web of rules and technicalities that can make a day at the DMV seem like a day at the beach.

The Times Poll found that 16% of all members of managed care plans who describe their health as poor said it was fairly difficult or very difficult to obtain a referral to a specialist or authorization for treatment. The same complaint was made by only 8% of sick people in non-managed care plans.

Denise Harris, an Ontario housewife, barely survived the gantlet after reporting symptoms to her HMO doctors that would later turn out to be ovarian cancer. At one point, her HMO withdrew approval for diagnostic surgery after Harris had already been prepped for the operation and was waiting at the hospital. Not until 10 months after she first visited the doctor did she have surgery to remove the malignant growth on her ovary.

“They had no regard for my life, safety or health,” she says of the medical bureaucracy that managed her care under the aegis of Health Net, the state’s second-biggest HMO.

During pretrial proceedings in a lawsuit Harris filed, Health Net argued that it had ceded all decisions about her care to Harris’ doctors at the San Antonio Medical Group in Rancho Cucamonga. San Antonio contended that it never refused Harris care, even though there might have been delays--and that the law does not allow for damages to compensate for delays in getting care.

Those responses underscore a burgeoning problem for HMO patients. The fastest-growing part of the industry consists of companies such as Health Net that contract with medical groups to provide care, rather than providing it through their own facilities, as the Kaiser Foundation Health Plan does. When a problem arises, these HMOs and medical groups sometimes blame each other.

“It’s just finger-pointing,” said Gary L. Tysch, Harris’ lawyer.


HMO officials say their members’ high level of satisfaction, as reported in survey after survey, is evidence that California’s health-care revolution is succeeding.

Indeed, on nearly every measure--except those involving choice--HMOs scored highest among insured Californians in a recent Times Poll. Overall, 92% of HMO members were pleased with their health care.

The HMOs contend that managed care will produce both healthier populations and a more cost-efficient health care system. Preventive care, a cornerstone of the HMO ideal, gets scant attention in fee-for-service medicine, they say, because most traditional insurance plans won’t pay doctors for services unrelated to diagnosing or treating a specific illness. That discourages patients from getting checkups, immunizations and other preventive care--measures provided free by most HMOs.

Moreover, it is widely acknowledged that fee-for-service medicine may encourage unnecessary and potentially harmful overtreatment, because doctors can prosper by performing expensive surgical procedures and ordering extra tests.

HMOs also insist they place far more emphasis on overseeing the quality of care delivered to their members. Physician “report cards” gauge patient satisfaction, they say, and the HMOs’ contract medical groups provide more peer review of doctors’ performance.

“There have been occasions in the fee-for-service world where doctors practiced bad medicine for a long time” with little oversight, said Jon R. Wampler, chief executive of Cypress-based PacifiCare of California, the third-largest HMO.

With HMOs, he says, “we have doctors checking other doctors’ work. . . . I think it’s darn hard for a doctor to practice bad medicine without us finding out about it.”


Today, almost four in 10 Californians with private health insurance--about 12 million men, women and children--get their care through an HMO. California HMO members represent about 20% of the 56 million Americans in such plans, and the HMOs’ share of the market here is twice the national average.

As a result, health care experts nationwide are closely watching California’s experience to learn how patients, doctors and society at large will be affected as managed care continues its inexorable march across the country.

HMO executives take care to avoid any suggestion that they are engaged in rationing. For one thing, allowing financial considerations to affect medical judgment in any particular case is strictly against state law. For another, the very word conjures up unsavory echoes of euthanasia, of the notion that some people do not deserve to survive.

“Making a decision on the basis of cost that would impact on [medical] quality is simply not in our lexicon,” said David Lawrence, chief executive of Oakland-based Kaiser, the nation’s largest health maintenance organization.

But he acknowledged the HMOs’ role in helping society deploy its finite medical resources. “Given that you have a fixed pot of money,” Lawrence asked, “how [do you] allocate it?”

In the absence of clear guidelines from federal and state governments, HMOs have taken it upon themselves to answer that question. The health plans contend that they are meeting employers'--and society’s--demands for lower costs. They say that most complaints about managed care come from patients unwilling to accept the end of a decades-old culture of medical “entitlement.”

The problem is that their answer may not be the one that society at large really wants.

Quality of Care

But many critics believe that, in the rush to bring some sanity to a notoriously inefficient medical system, HMOs have taken on too much authority.

“I don’t think the public would argue that [Congress’] failure to act on health reform was a handoff to health insurers to reform the market and do what they saw fit,” says Judith Bell, co-director of Consumers Union’s San Francisco office.

Moreover, critics say, the HMOs may have swung the pendulum too far in placing economics ahead of quality of care.

As The Times has found, the patients tending to be most poorly served by HMOs are those like Harris: victims of unusual or complex diseases who need highly specialized treatment or carefully coordinated care.

Also poorly served by HMOs, according to many experts, are patients suffering from such chronic conditions as arthritis or multiple sclerosis, and patients in need of rehabilitative therapy.

In both categories, expensive treatments extend over long periods, while recovery is likely to be slow and subtle. But some HMOs cut off treatment when a patient plateaus--even though a specialist may say that continued therapy will be beneficial.

For the chronically ill, timely access to specialists “can make the difference between a decent quality of life and barely surviving,” says Laura Remson Mitchell, government issues coordinator for the California chapter of the National Multiple Sclerosis Society.

“In extreme cases,” she says, “the fact that you can’t get to appropriate providers can result in a chronic condition turning into a fatal one. Chronic disease magnifies all the problems that exist for everyone in HMOs.”

‘They Beat Him Down’

That has been the experience of Lisa Baynes, a 38-year-old mother of twins who was diagnosed with multiple sclerosis six years ago. Coping with the disabling effects of the disease has been hard, the Mission Viejo woman says. But the battles with Cigna, her HMO, at times have been harder.

When symptoms flare, Glendale-based Cigna requires Baynes first to schedule an appointment with her primary care doctor. If a specialist referral is needed--as it often is--the primary care physician must get authorization from a committee of his or her medical group that meets periodically to review such requests. The process can take weeks.

“They beat him down,” Baynes says of the reception her primary care physician gets at these sessions. The neurologists to whom she has been referred in her Cigna medical group have not had much experience treating patients with multiple sclerosis, she adds.

Cigna officials respond that the plan has gone out of its way to accommodate Baynes’ concerns by allowing her to see an out-of-network doctor. “This is an excellent example of how we accommodate and take care of our members,” says Dr. Chuie Yuen, Cigna’s medical director. But Baynes says she has been told she can only see that specialist one time.

Some national studies show that HMOs are as good or better than the fee-for-service system at treating routine ailments--or those, such as heart conditions, for which care is widely standardized. Other studies, however, highlight the HMOs’ shortcomings in treating chronic or unusual maladies.

A 1994 survey of nearly 5,000 elderly patients published in the Journal of the American Medical Assn. found, for example, that HMO members suffering arthritic pain were less likely than non-HMO members to have been referred to a specialist and less likely to “be followed up or monitored closely.”

Most important, of those still experiencing joint pain at the time of the survey, HMO members were less likely to report any improvement in their condition.

The results concerned the study’s authors because, as a chronic condition of the elderly, joint pain “should have been better ameliorated for HMO enrollees,” they wrote.

A recent national study by Harvard University researchers found that patients with serious illnesses in HMOs and other managed care plans have more difficulty getting services and treatment than people in fee-for-service plans.

Among managed care members, 22% reported major or minor problems getting treatment that the patient and doctor thought was medically necessary, compared to 13% with traditional insurance. Similarly, 24% of sick people in managed care plans said they were unable to get a needed diagnostic test in the past year, compared to 15% in fee-for-service plans.

“It doesn’t mean everybody is having a lot more problems, but they are having more problems when sick,” said Robert J. Blendon, a professor at the Harvard School of Public Health and one of the study’s authors. “Very few people, when they buy a plan, investigate how they will treat you when you’re sick.”

The Group Health Assn. of America, an HMO trade group, criticized the study’s methodology and said it was impossible to conclude from the data how well HMOs are working.

Doctors say some HMOs try to ration care by refusing to pay for treatments that do not promise a distinct cure. This amounts to a radical change in medical philosophy--especially given that cancer specialists regard patients as “cured” if they survive just five years past the onset of the disease.

And the switch in thinking is taking place in almost the complete absence of public debate.

“This goes to having an administrator, whether a doctor or not, telling a family that your mom’s life is not worth paying for because this treatment isn’t curative,” said Dr. Beth Y. Karlan, head of gynecological oncology at Cedars-Sinai Medical Center in Los Angeles. “But is it worth it to allow a 34-year-old woman to live another nine months and see another Christmas with her 5-year-old daughter? I have patients who I feel are real triumphs because I got them another two years of life.”

Karlan says she battles constantly over such treatment with the health plans that provide her patients’ coverage.

Managed care companies “ask, ‘Do you think you’re going to cure them?’ I say, ‘I don’t think I’m going to cure the patient, but I think I can give them longer survival.’ They say that it’s basically not worth it to pay for additional surgeries or therapies just to give them a few more months.”

Dr. Malik M. Hasan, chairman and chief executive of Health Systems International, Health Net’s parent company, strongly disputes the notion that cases such as those cited by Karlan show that HMOs are rationing care.

“These are very complex social issues as to how far you should go in the treatment of terminal cases,” said Hasan, a neurologist. “But it’s not a payment dispute. It’s a philosophical dispute about how much pain and misery you should be able to inflict on a patient who is terminally ill.”

More broadly, Hasan says he sees no evidence that the industry is denying necessary medical care “in any major fashion.” For himself, he resolves such issues by thinking: “If this was my wife or daughter or sister, what would I do?”

Rehabilitative Therapy

Still, studies show HMOs also tend to allow shorter and less intensive rehabilitative therapies than accident victims, stroke patients and other rehab users have long expected.

A 1993 study for the U.S. Department of Health and Human Services concluded that stroke patients in HMOs “received significantly less physical therapy while in the hospital and had greater motor and speech defects at discharge, yet were not more likely to have post-discharge speech or physical therapy planned,” a pattern suggesting “that HMOs may skimp on rehabilitative care.”

Says Dale Eazell, chief executive officer of Casa Colina Hospitals, a rehabilitative complex in Pomona: “The HMOs say, ‘We don’t find our stroke patients need 30 days [of rehabilitation]; we find the outcomes are just fine with 10 days.’ But what data do they have?”

Hasan counters that rehabilitation hospitals are “the worst [offenders] in ratcheting up the cost of health care. . . . They look at each patient who comes in . . . and try to figure out how to milk them. They know, and we know, that the pain is going to go away when it goes away.”


Most HMO members--like most insured Californians--are happy with the routine care they receive, the Times Poll found. Indeed, HMO members--some at the encouragement of their health plans--deluged The Times with accounts celebrating their doctors, their treatment in both acute and chronic cases, even their insurers’ office staffs.

Seventy-one-year-old Sandy Beck of Burbank said CareAmerica, his Medicare HMO, was a “lifesaver” when he had thyroid cancer in 1993. His $20,000 hospital bill and 34 chemotherapy treatments were fully paid, and it costs him just $5 per prescription for medication he must take to keep his condition in check.

“I had a wonderful surgeon and wonderful doctors,” Beck said. “They take care of everything.”

But patients with complicated or chronic illnesses often find that rules ostensibly designed to discourage the overuse of medical resources function more as technicalities that can only be overcome by lengthy bureaucratic battles or court intervention.

That’s what happened to Harry Christie, a Silicon Valley businessman, when his 9-year-old daughter, Carley, was diagnosed with a rare kidney tumor in 1993. Christie demanded that his HMO, TakeCare, allow Carley to be operated on by a leading U.S. specialist in the tumor; the plan refused, insisting that the procedure be done by a urologist who had never worked on a similar condition.

Why? Both doctors were on TakeCare’s provider lists, but the expert surgeon was not affiliated with the medical group with which Christie had signed up. (Christie had him perform the operation anyway--and then spent two years in binding arbitration before TakeCare was ordered to pay the bill.)

Another barrier keeping patients from effective treatment is lack of information.

Sometimes, patients are not told the basis on which treatment is refused by their HMO. HMOs generally do not allow patients to go outside their own physician networks for second opinions. And doctors who have worked in managed care say some plans deliberately restrict what patients are told about possible treatments, lest they demand a costlier one.

“If a doctor doesn’t operate, there’s no disclosure to the patient that there’s an operation for your problem and we’re not going to tell you about it,” says David Thomas, a San Diego surgeon who retired at age 55 rather than continue working under managed care. “That means there’s not an event that might send the patient to get a second opinion.”

That issue arose between Kaiser and Billie J. Comer, a Northern California employee of AT&T;, when Comer’s son Ryan fell ill with a rare pediatric cancer.

Only after Ryan completed several unsuccessful courses of chemotherapy did Comer learn of a treatment involving bone marrow transplants--by reading an article about it in Ladies’ Home Journal. Kaiser doctors, she said later, explained that they had failed to mention the therapy because Kaiser would not pay for it anyway.

Kaiser officials say the HMO has no set policy governing the information given to patients regarding potential treatments.

“Inside our organization, a patient with a major tumor would see an oncologist [a cancer specialist], and they--along with the primary care physician--would discuss the possible therapies,” says Dr. Ian Leverton, chief of the HMO’s committee on new technologies.

In the end, Comer raised more than $100,000 to pay for the treatment herself. By then, Ryan’s disease had progressed too far for it to be effective; he died in 1991.

Coverage of such experimental treatments is a persistent issue between HMOs and members. “Sometimes these decisions are incredibly arbitrary,” says Geraldine Dallek, executive director of the Los Angeles-based Center for Health Care Rights. “We don’t know their internal guidelines for anything.”

Health Net, with 1.2 million members, was hit by a $90-million court judgment in 1993 when a jury learned that it had denied a costly bone-marrow transplant to breast-cancer patient Nelene Fox while approving one for another member--who happened to be a Health Net employee.

The plan said its decisions were based on medical evidence, but the Fox family’s lawyers produced evidence showing that the HMO’s managers got bonuses for keeping treatment expenses low.


The managed care revolution has drastically reduced the paperwork that long frustrated Californians in traditional fee-for-service insurance plans. Ninety-one percent of HMO members give their plans good marks on paperwork, versus 81% of Californians with traditional coverage, The Times Poll found.

But if bureaucracy for most patients has been reduced, the new health system--having evolved without conscious planning--is surprisingly short on accountability.

Such data as HMO complaint ratios, legal settlements and even operational deficiencies uncovered during official inspections are shrouded in secrecy, either by government action or the lack thereof. And the state agency that regulates HMOs exercises little jurisdiction over the medical groups that actually deliver the care--and where patients and doctors say many of the system’s abuses occur.

Meanwhile, the industry’s well-financed lobbying arm in Sacramento, the California Assn. of HMOs, battles relentlessly--and to a large degree successfully--against reforms that would allow the public to compare the quality of each of the nearly 100 plans registered in the state and would subject the entire industry to sharper governmental scrutiny.

Even doctors trained to be patient advocates find the system confounding; many say the paperwork burden has shifted to them.

“It’s not patient care anymore; it’s fighting the insurance companies,” says Dr. Sherry Braheny, chairman of the San Diego Medical Assn.'s committee on bioethics. “I have a four-page form to fill out to get a wheelchair for a patient, instead of a prescription. Everybody has found this kind of paperwork is worse” under HMOs.

Some industry leaders concede that HMOs do a woeful job of educating their members about the limitations of their coverage. By state law, this information must be made available to any enrollee who asks. But in practice, it is couched in such impenetrable language that many patients come away without real understanding.

PacifiCare’s Wampler recalls the day his father brought him information from other HMOs offering Medicare coverage. Wampler scanned the documents--and ended up so confused he took them to PacifiCare’s own experts to decipher.

One feature that HMOs take pains to promote is their commitment to preventive care. Health Net promotes itself as “The Wellness Company.” Indeed, the Times Poll found that 84% of HMO members are satisfied with their plans’ preventive care, a slightly higher proportion than among Californians with other types of coverage.

Preventive Care

The industry says that because HMOs receive a fixed fee to provide all of a patient’s care, it is in their interest to keep their patients healthy. But many experts say the HMOs’ interest in prevention programs begins and ends with their value as marketing tools.

“First, [preventive programs] can be a positive trade-off against limits on provider choice,” said Dr. Schumarry Chao, a former health benefits administrator for several major Southern California companies who now serves as an independent consultant. “Second, they appeal to consumers. Health plans that market ‘wellness’ have consistently graded higher” in consumer surveys, she notes, “even though they have no health risk reduction programs whatsoever.”

It’s a rare HMO that does not ply its new members with brochures promoting anti-smoking campaigns, weight-reduction plans and the value of exercise.

But far fewer maintain long-term screening programs to identify chronic risk factors for a wide range of preventable diseases, do consistent follow-up to ensure that prescribed medications have been taken or specialist referrals approved, or maintain computerized databases enabling them to coordinate the care that individual patients receive from various doctors.

In fact, the state Department of Corporations, which regulates HMOs, has cited almost every plan it inspected over the last five years for failures in exactly those areas. And one study by the state health department found that immunization rates for children of Medi-Cal recipients were lower among those treated by HMOs than those receiving care at public clinics.

The reason, critics say, is that such programs don’t pay. “To be effective, preventive care is a long-range bet,” said Robert E. Tranquada, a USC professor of medicine and public policy. “Immunization, diet, mammography: These are mostly things that won’t provide short-term benefits.”

Given the high turnover in many HMOs’ patient rolls, they may see no point in making their patients healthier so another plan can reap the benefits 10 or 20 years later.

HMO proponents strongly dispute this. Robert Margolis, chief executive of HealthCare Partners, a large Los Angeles medical group, says patients often are able to keep the same doctors when they switch health plans, because established medical groups are in so many plans.

“The incentives are clear,” Margolis said. “If you believe you’re going to take care of a population for some time . . . then providing prevention, wellness and education will ultimately mean you’ll spend less money and time if they become acutely ill.”

Other doctors say many HMOs’ fee structures discourage preventive care. “It’s in the contract that you must provide this,” said Dr. Brian Greenberg of Tarzana, who has many HMO patients. “But there is no real [financial] incentive.”

To provide a year’s care to a 1-year-old, Greenberg says, he receives fees of $266 to $377 from the various HMO-related medical groups with which he contracts.

His wholesale cost of immunizations for children in the first year, however, comes to $220--leaving him as little as $46 to provide all the other care a child might need.

“The value of well care in the first year of life goes far beyond immunizations,” he says. “How are they eating? How are they gaining weight? Are they developing appropriately and learning how to sit, stand and walk? . . . These are things that are absolutely critical to a baby, but they take a lot of time.”

Given the scant incentives to provide care, “for a practice that is less scrupulous, there are lots of places where skimping can occur,” Greenberg notes--such as delaying vaccinations. “If you have a practice like ours, committed to providing the best care you can, you’re still going to feel rushed or pressed when you’re seeing children in these circumstances.”

About This Series:

In a seven-month investigation, The Times found that some of the common assumptions about HMO medicine in California do not stand up to scrutiny. This five-day series focuses on key things you need to know about the health care revolution.


TODAY: Medical care is being rationed in California. That’s one of the keys to “managed care.”

By imposing restrictive policies and erecting bureaucratic obstacles, health maintenance organizations have accumulated the power to override doctors’ decisions and act determine the nature and extent of the care 17 million Californians receive. While the healthy majority is satisfied with its care, the consequences can be bitter for the chronically or seriously ill.

HMOs’ fall short on preventive care measures.

HMOs say they are more oriented toward preventive care than traditional fee-for-service medicine, noting that the healthier they keep their members, the more money they’ll save. In fact, the fee structure of many HMOs has the effect of discouraging such basic preventive programs as child immunization. Moreover, many California HMOs score consistently low on measures of preventive care.


MONDAY: The state’s HMOs are regulated by a toothless watchdog.

Although HMOs function as insurance companies and as health care providers, their primary regulator isn’t the Department of Insurance or the Department of Health Services. Instead, they are overseen by the Department of Corporations, a notoriously weak agency whose other duties include regulating escrow companies and mortgage lenders. Many observers credit the agency with improving its record on health care, but that record is still poor. In 20 years, it has levied just one fine against an HMO.

Your HMO’s complaint system can be an intimidating maze.

State law mandates that each HMO have a grievance procedure for resolving member complaints. The HMOs say their grievance systems work, but consumer advocates and patients say they strongly favor the health plans. Indeed, patients who appeal decisions about their care may find their complaints reviewed by the doctors who made the original calls. And the process can drag on for months.


TUESDAY: Key decisions about your medical care have been taken out of your doctors’ hands.

Doctors across California feel they’ve been deprived of their role as patient advocates. That, compounded by a clamp-down on fees that has sharply reduced their income, has some doctors fleeing the state or the profession.

Experienced medical professionals are fleeing the state.

Many doctors who say they are tired of facing ethical dilemmas and financial pressures fostered by managed care have retired or moved to states still relatively untouched by HMOs. But they may not be able to escape the HMO wave for long.


WEDNESDAY: If something goes terribly wrong, you may not be able to sue.

Many HMOs have written mandatory arbitration clauses into their contracts with California employers that block members from filing lawsuits against the HMOs. These clauses often go unnoticed by patients until a problem arises.

HMO cost-cutting transfers millions of dollars from medical care to corporate coffers.

On average, HMOs spend 80 cents of every premium dollar on medical care; the other 20 cents goes to administration, dividends, or profits. The “upstreaming” of medical dollars to HMO shareholders has become an issue with the employers and governments that pay the bills. Moreover, while HMOs tighten up on what they pay doctors and hospitals for your care, their executives’ salaries have ballooned: Last year, Foundation Health Chairman and CEO Daniel Crowley, a former insurance executive, earned $3.25 million in cash, plus tens of millions in stock options.

Your HMO may not pay for your trip to the emergency room.

If your chest pains turn out to be indigestion, can the HMO refuse to pay because there really was no emergency? Such denials became so troublesome for patients and ERs that the Legislature took action, requiring HMOs to pay if patients had reasonable cause to fear they were facing an urgent problem. The industry is trying to kill the new law. Meanwhile, emergency rooms say their costs are being driven up by HMO bureaucracies.


THURSDAY: The system can be improved.

Patient-care advocates and some HMO executives agree that much can be done to improve members’ access to care and information. Among the proposals are creation of a statewide HMO ombudsman, improvement of patient surveys and increasing resources for state regulators.


How the Poll Was Conducted

The Times Poll interviewed 3,297 California adults by telephone, June 17 through 25. Of those interviewed, 2,750 respondents have health insurance, including 2,012 in managed care and 738 in traditional insurance plans. Of the managed care participants, 1,381 are members of health maintenance organizations. A list of questions was used to determine the health status of respondents. Telephone numbers were chosen from a list of all exchanges in the state. Random-digit dialing techniques were used so that listed and unlisted numbers could be contacted. The sample was weighted slightly to conform with census figures for sex, race, age and education. The margin of sampling error for the total sample and for all respondents with health care insurance is plus or minus two percentage points; for certain subgroups, the error margin may be somewhat higher. Poll results can also be affected by other factors, such as question wording and the order in which questions are presented.


California’s Largest HMOs

Though Kaiser remains by far the state’s biggest health maintenance organization, HMOs that operate as networks of providers--rather than Kaiser-style centralized groups--are the fastest growing.


Year Tax Plan Subscribers licensed Status Kaiser Foundation 4.6 million 1975 Nonprofit Health Net 1.24 million* 1979 For profit Pacificare 918,000 1978 For profit FHP/TakeCare 875,000 1961 For profit CaliforniaCare 697,000* 1986 For profit Cigna 656,000 1977 For profit Foundation Health 530,000 1978 For protit PruCare 412,000 1990 For profit Aetna 357,000 1981 For profit Blue Shield HMO 279,000 1988 Nonprofit CareAmerica 213,000 1986 For profit


* The parent companies of Health Net and CaliforniaCare have announced plans to merge later this year.

Source: California Assn. of HMOs

Top HMO States

California has the highest level of HMO enrollment of any state. The top five:

HMO Market Share

California: 38.3%

Oregon: 37.5%

Maryland: 36.2%

Arizona: 35.8%

Massachusetts: 35.2%

Source: Group Health Assn. of America

California Cities

In every major metropolitan area of California, the majority of residents with commerical health insurance belongs to HMOs.

Percentage HMO Members





San Diego

San Francisco

San Jose

Los Angeles-Long Beach

Anaheim-Santa Ana


Source: National Research Corp. surveys


The ABCs of Health Care

Twenty years ago, most health insurance was delivered through traditional indemnity, or fee-for-service, plans. Today, there are health maintenance organizations (HMOs), preferred provider organizations (PPOs), point-of-service HMOs and other models.

Even among HMOs there are different varieties. In California, most common are so-called group or staff model plans, such as Kaiser Permanente, and “individual practice association” (IPA) models, such as Health Net and others. Some health plans offer “mixed models,” which include elements of both group and IPA care. In HMOs and most PPOs, the patient must choose a primarcy care doctor--usually a family physician, internist, pediatrician or obstetrician-gynecologist--who coordinates care. This doctor also acts as a “gatekeeper,” making referals to specialists and other services. Without these referrals, the plan won’t pay for services.

HMO staff/group model: Plan owns its own hospitals and clinics and employs doctors who see only patients who are members of the plan. Doctors are paid straight salaries, but also may receive group bonuses at end of year if the HMO makes money. Patients usually pay a low premium and have no out of pocket costs, but can go only to A1 Care hospitals and see only A1 Care doctors.

Preferred Provider Organization (PPO): PPOs fall in between HMOs and traditional indemnity plans. Patients must choose from a network of doctors and hospitals, but the choice is usually wider than in HMOs. Doctors and hospitals agree to discount their services, but are paid for each service rendered. The patient usually pays a percentage of the discounted fee, say 10% or 20%. Patients to go to a doctor outside the network, but at higher cost.

HMO: IPA/Network model: Patient chooses from list of doctors who contract with the plan but practice in their own offices, typically as part of a small or large medical group. Out-of-pocket expenses are minor, usually a $5 or $10 “copayment” per office visit. Doctors typically see patients from several different HMOs and may also see patients covered by indemnity or PPO plans. The primary care doctor is reimbursed through a “capitation” payment--a set monthly, per-patient fee. Doctors receive no more money if costs exceed the capitation payments.

Traditional Indemnity: The least restrictive of all health plans, traditional indemnity insurance gives the patient virtually unlimited freedom to choose doctors and hospitals. But these are the most expensive type of plan. Because doctors are reimbursed for every service performed, traditional insurance provides a greater incentive for expensive and potentially harmful overtreatment.