Health Care Reform: 214 and 216 Don’t Get It Done

Nearly one out of three Americans enrolled in health maintenance organizations are Californians, putting the state in the vanguard of the national movement for good medical treatment at reduced cost through managed care. Few Californians quarrel with the quality of managed care; in a 1995 Times poll, 92% rated managed care good or excellent, and only a small minority of health care experts dispute the system’s effectiveness.

On the November ballot, however, are two propositions, 214 and 216, to increase government regulation and oversight of managed care. We urge a “no” vote on both. They offer faulty solutions. These are the problems they address:

* Gag rules and financial incentives for the denial of care “Gag rules” are contracts that prohibit physicians and nurses from telling a patient about treatment options not covered by the patient’s plan. “Financial incentives” typically reward primary-care or family physicians for referring only a small percentage of their patients to expensive specialists.

The managed-care industry would have you think that such provisions have already been outlawed by AB 2649 and AB 3013, bills that Gov. Pete Wilson signed into law last month. AB 2649, however, prohibits only “direct financial incentives for specific patients or classes of patients with specific conditions.” This leaves the door open for managed-care companies to offer, for example, end-of-the-year bonuses to physicians who manage to keep high-cost referrals to a minimum.

Similarly, AB 3013 bans “written gag rules” but fails to prohibit “unwritten gag rules.” In pursuing the latter, HMO administrators phone physicians to try to persuade them to reverse health care decisions.

* Failure to disclose the criteria for “denial of care.” Sponsors of Propositions 214 and 216 have documented instances in which managed-care panels, after reviewing the treatment recommendations of primary-care physicians, have approved pricey treatments like bone marrow transplants for some patients while denying them to others in similar conditions.

Both propositions propose to remedy such inequities by requiring managed-care companies to disclose “written criteria for the denial of care.” Managed-care companies are loathe to do so. Earlier this year, they told the Legislature that such criteria are a “trade secret.”

* Failure to disclose overhead. Propositions 214 and 216 both require managed-care plans to disclose expenses, such as administration and executive compensation, that are “not related to the provision of direct health care services.” Evidence suggests that some managed-care companies are more prudent than others. According to the California Medical Assn., for instance, as much as 30 cents of every premium dollar paid to an HMO covers administrative or executive compensation costs.

While these problems are legitimate, they cannot be effectively solved through the fuzzily worded provisions of 214 and 216. Both propositions, for example, try to eliminate gag rules by allowing any “licensed or certified” care-giver to disclose any information “relevant to the patient’s health care.” While physicians are certainly entitled to freedom of speech, managed-care companies should be able to impose some restrictions on the care recommended by nurses, hospital orderlies and other employees.

Even more rigid than 214, Proposition 216, if passed, could be changed only by a two-thirds vote of the Legislature. Few California laws enjoy that sort of security from change.

Propositions 214 and 216 rightly assert that the unprecedented growth of managed care requires increasingly vigilant government oversight. But the regulations mandated by these propositions would tie the hands of managed-care companies, making it difficult to effect the nimble balance between quality and cost-effectiveness that has been essential to their success.