Dueling HMO Reform Plans Vie for Votes

Two groundbreaking, but competing, measures on California’s November ballot are leading a national backlash against the health care concept called managed care.

A flurry of recent state and federal initiatives seeks to rein in HMOs that critics contend are short-changing patients in the name of cutting costs and boosting profits. In Oregon, for example, the fixed-rate pay system is under attack; nationally, a new law forcing insurers to cover at least 48 hours of maternity hospitalization was aimed at HMO-inspired cost-cutting.

But the California measures go much further than such piecemeal regulatory efforts by attacking the salaries of HMO executives, penalizing HMO mergers and banning such noxious practices as so-called “gag orders,” under which HMOs seek to restrict what doctors can tell patients.

The two measures, Propositions 214 and 216, have attracted surprisingly little voter interest. And past history suggests that the chance of either one passing has been jeopardized by the likelihood of voter confusion.

“Voters are confused by initiatives anyway even when it’s just a yes-no vote. When there are two, it’s even more confusing,” said Robert M. Stern, co-director of the Center for Governmental Studies in Los Angeles. When voters are confused, he added, they are likely to vote no.

The dueling health care propositions are the result of a falling out between unions and consumer groups last winter as they tried to draft a managed-care reform initiative. They went their separate ways and have been bad-mouthing each other ever since. At a recent legislative hearing, consumer activist Harvey Rosenfield produced a large, aromatic red herring to accuse Proposition 214 supporters of pushing a weak measure “that stinks.”

Whether the ideal of reform survives such bickering and the inevitable voter confusion over the similarly intentioned measures remains to be seen. What is clear is that the two health care measures have not exactly aroused the passions of voters, which is fine with opponents.

“We think this is fundamentally the wrong way to regulate a highly complicated and rapidly changing industry,” said Nancy Monk, a lobbyist for PacifiCare Health Systems, a Cypress-based HMO.

But Rosenfield, whose Ralph Nader-affiliated group and the California Nurses Assn. are leading the fight for Proposition 216, said changes are needed now because state regulators and lawmakers have failed to adequately protect consumers from managed-care abuses.

“HMOs have lost their traditional commitment to healing and caring,” said Rosenfield, author of the 1988 auto insurance reform initiative, Proposition 103. “It’s criminal what is happening.”

There is ample testimony, in California and elsewhere, to support such criticism, and reform proponents have tried to put a human face on the issue by presenting what they term “HMO victims” to speak at legislative hearings and press conferences.

Proposition 214 supporter Karen Henderson of Encino said her 4-year-old son, Kyle, who suffers from cerebral palsy, has been denied access to physical therapy by the only HMO offered through her employer.

“I was told that because my son’s condition could not be improved in six weeks’ time, he would not be eligible for physical therapy,” Henderson said at a legislative hearing on the two measures last week in Los Angeles. “My son was not examined, didn’t get to see a doctor. It was an outright denial.” The HMO referred her to a government-funded program for physical therapy treatments, she said.

To get the public’s attention, campaign ads by supporters are projecting images of a Marcus Welby look-alike with his mouth gagged and are issuing “casualty of the day” reports to dramatize the alleged shortcomings of health maintenance organizations.

But they’re being outspent by opponents of both measures--business interests led by HMOs and hospitals--who are spending millions on a slick television advertising campaign dreamed up by the same people who created “Harry and Louise,” the folksy TV couple who helped sink President Clinton’s health reform plans a few years back.

The initial ads, featuring identical twins bickering over the two measures in a mock TV interview, aim to split supporters’ votes by portraying the two measures as virtually the same, although in fact one is significantly tougher and more complex than the other. Opponents plan to launch a second round of TV ads Monday, criticizing the measures as too costly.

By contrast, supporters of the two measures have yet to air a single TV ad. Proposition 216 supporters say that will change, possibly this week.

As with many other California ballot propositions over the years, the health care initiatives would change the ground rules for an industry already under fire here and elsewhere. Proposition 214, backed by the Service Employees International Union and health care advocacy groups, and Proposition 216 share several features:

Both would outlaw the HMO practice of offering bonuses and other financial incentives for doctors to deny or delay medical care, and prohibit so-called “gag orders” by protecting doctors, nurses and other medical staff from being fired or demoted for criticizing HMOs or advocating for patients.

Supporters include doctors like Jennifer Reifel, chief resident of medicine at UCLA Medical Center, who said she frequently encounters patients who complain of delays or denials of medical care by HMOs or their affiliated medical groups.

“You need to rely on your doctor and know that they will go to bat for you when you need care,” said Reifel, who is campaigning for Proposition 214. “HMOs are intimidating doctors and providing incentives to limit care.”

Propositions 214 and 216 would also give patients the right to a second medical opinion, with a physical examination, when the HMO denies medical services--an X-ray, for example--recommended by the treating physician. Both measures would also require HMOs to publish the guidelines they use for denying treatments, a provision that HMO critics say would help prevent arbitrary denials.

But the measures part company on several key issues.

Proposition 216 would seek to raise hundreds of millions of dollars annually by imposing so-called “greed fees” on health care executive pay. It would also impose fees on a host of routine business activities by health care companies: For example, hospitals that merge with another company, lay off workers or close some facilities would have to pay a “community health service disinvestment fee.” The fees would be used to implement the measure and pay for certain public health services.

Proposition 216 would also impose fees on hospitals that try to save money by reducing their number of licensed inpatient beds. Many California hospitals have been downsizing their facilities because they are having trouble filling even half their available beds.

Opponent Allan Zaremberg, executive vice president of the California Chamber of Commerce, calls the fee a “penalty for being efficient.” Some hospitals, he said, “will go out of business because they won’t be able to pay the tax.”

Proposition 216 would also form a new government watchdog agency to monitor HMO practices. The agency would issue reports on health care quality, advocate for legislation to “protect and promote the interests of health care consumers,” and intervene in legal disputes involving enforcement of the measure.

For its part, Proposition 214 would prohibit health care companies from firing workers without “just cause.” Proponents say it would also strengthen current law by requiring the state to maintain and regularly update “minimum, safe and adequate” levels of patient care in hospitals, nursing homes and other health care facilities.

Opponents contend that both propositions would hurt businesses and consumers by reversing the progress the managed care industry has made in reducing medical costs. They say the measures would raise medical costs, boosting health insurance premiums for employers and workers.

Opponents also denounce certain provisions of the two measures, such as Proposition’s 214’s “just cause” firing feature, as blatant attempts to protect union jobs. Supporters of the two measures concede that the provisions may save jobs, but insist that their intent is to protect patients from reckless medical cost cutting.

“There is not a single job guarantee in here,” said Maureen Anderson, a spokeswoman for Proposition 214.

Analysts for the Legislature have estimated that either measure would cost the state anywhere from tens of millions to hundreds of millions of dollars annually. And the HMO-hospital group, which calls itself Taxpayers Against Higher Health Costs, contends that the measures would cost California employers between $1.3 billion and $2.7 billion in 1997, while raising medical premiums for business and consumers as much as 14.5%. Those figures come from a study by Barents Group, a Washington-based economic research firm, that was paid for by the HMO group.

Supporters of the measures dismiss those estimates as grossly exaggerated and based on flawed analyses.

Indeed, Proposition 214 proponents cite a study by UC San Francisco’s Institute for Health Policy Studies that reported cost savings from Proposition 214 would more than offset extra costs. Reaching a strikingly different conclusion from state analysts or Barents Group, UCSF researchers estimated that Proposition 214 would save California’s private employers between $91 million and $912 million per year. The study was requested on a pro bono basis by the Proposition 214 campaign.

State Controller Kathleen Connell also believes Proposition 214 would lower costs. She is one of the directors of the California Public Employees Retirement System who last month voted to endorse Proposition 214. The big state pension fund, which buys health insurance for nearly 1 million California state employees and their families, endorsed Proposition 214 but took a neutral stance on Proposition 216.

Connell said Proposition 214’s requirement that health insurers disclose how much they are spending on marketing, advertisements and other business expenses “will encourage them to minimize administrative expenses.” And requiring second opinions for treatment denials should “encourage earlier treatment when conditions are less severe,” and thus less expensive to treat. Also, requiring HMOs to disclose to members the criteria for denying treatments should help reduce medical malpractice lawsuits, she said.

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Dueling HMO Measures

Propositions 214 and 216 on the Nov. 5 ballot propose new regulations for health maintenance organizations and other health care businesses. Both initiatives would:

* Ban financial incentives for doctors and nurses to deny or delay care.

* Prohibit “gag orders” that prevent doctors and nurses from criticizing HMOs.

* Prohibit disclosure of medical records without patient consent.

* Require health plans to provide a second opinion, based on a physical examination, when insurers or medical groups deny medical treatments recommended by a doctor.

But the two measures differ in other respects. Some key differences:

PROPOSITION 216 WOULD

* Prohibit increases in medical insurance premiums, co-payments and deductibles unless companies can demonstrate they are financially “necessary.”

* Impose several taxes on health care businesses. These would apply to “excessive compensation” paid to company executives and other officials, to hospitals that close facilities or reduce their number of beds, and to health care mergers. These taxes, estimated at hundreds of millions of dollars annually, would be used to pay any costs of implementing Proposition 216 and for public health services such as trauma care or preventive care.

* Create an independent consumer association to act on behalf of consumers and monitor insurers’ practices.

* Prohibit insurers or medical groups from requiring mandatory arbitration in medical malpractice claims. Patients would have to consent to give up their right to go to court.

* Require “safe and adequate” staffing levels at health care facilities. Also require the state to set specific numbers and types of workers necessary to ensure safe staffing.

* Require two-thirds vote of Legislature to amend.

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PROPOSITION 214 WOULD

* Require hospitals, nursing homes and other medical facilities to maintain “minimum, safe and adequate” staffing, and require the state to regularly update those standards.

* Prohibit HMOs and medical groups from firing or demoting doctors and other health care workers without “just cause.”

* Require a majority vote of the Legislature to amend.