HMOs: Oversight Trails Dramatic Change : Managed care presents challenges along with its benefits

President Clinton tried and failed last year to create a health care revolution by steering Americans into programs intended to control the soaring costs of treatment and insurance. But for Californians, the revolution is already here: Half of the state’s population is enrolled in “managed care,” mainly health maintenance organizations, or HMOs--medical-insurance groups that limit costs by controlling patients’ access to services.

In a recent series, The Times examined HMOs in California, which has the highest enrollment rate of any state. A Times poll found HMOs remarkably well-accepted among the 12 million covered Californians. The vast majority in the poll gave high marks to the quality of their care. HMOs have indeed offered many benefits, reducing paperwork and unnecessary medical tests and holding down insurance premiums for both employers and workers. But not without cost. HMOs reverse the traditional economic incentives, rewarding doctors for delivering less, not more, care. That seems to work well for routine illnesses and preventive care but not always when it comes to major illnesses or conditions requiring rare or experimental drugs or therapy.

PHYSICIANS QUITTING: The HMO trend has radically altered the practice of medicine, for better or worse. HMOs diminish the authority of doctors, and many in overcrowded specialties are being driven out by cost-conscious insurance executives--some of whom have been denounced for their high salaries. Almost all physicians are losing income; more than 2,600 gave up their California licenses last year.

The changes may ultimately prove beneficial, and may present key lessons on the national level for Medicare as it turns to managed care. But the shift to HMOs is happening with scant government oversight. The public has little access to objective information about HMOs and little power to complain. Many HMOs require members to agree to binding arbitration to settle malpractice claims or disputes over fees. The patient is often disadvantaged in such arbitration, and the results are secret, thus restricting public information about doctors and hospitals with high incidences of malpractice complaints.

Most readers were surprised to learn that HMOs are regulated not by the state Department of Health Services but by the strapped Department of Corporations. HMO lobbyists this year killed a useful bill that would have allowed the department to set up a toll-free line for consumer complaints.

SACRAMENTO’S ‘DOCTORS’: The Legislature should not micromanage. A bill to compel insurers to cover at least a 48-hour hospital stay for mothers and newborns is a well-intentioned but misguided attempt against the HMOs that are trying to push mothers out just eight hours after giving birth. Such decisions should be governed by the attending physician, not assembly-line economics or amateur doctors in the state Assembly.

However, the flap over births should tell HMOs that they have a public relations problem. Many people fear that in a crisis they will be arbitrarily denied proper treatment for reasons of cost. The industry could help dispel doubts by making clearer what it does and does not cover in esoteric or emergency treatment. And it should drop opposition to proposals to enable subscribers to make more informed decisions on choice of coverage. California may be the leader in HMOs, but it lags 30 other states in requiring HMOs to disclose the number and disposition of grievances.

The Times survey suggests that HMOs enjoy substantial acceptance. Industry leaders should not jeopardize that by resisting logical oversight and more equitable arbitration of disputes.