Experts Foresee More Efforts to Reform HMO Regulation

The decisive defeat of two HMO regulatory measures in Tuesday’s elections is unlikely to quell a torrent of state and federal legislative reform efforts that are being fed by growing public anxiety about managed care, health policy experts said Wednesday.

But opponents were savoring their victories over the labor-union-backed measures that would have imposed stringent controls on health maintenance organizations and hospitals in California. The election outcome, supporters contend, signals the public’s satisfaction with managed care and a rejection of further government intrusion into health care.

“Californians know that they receive the best health care in the world,” said Myra Snyder, president of the state’s largest HMO trade group. They “do not want government programs that result in higher costs or additional burdens on taxpayers.”

The California measures, propositions 214 and 216, were widely seen as a litmus test of public sentiment about managed care in a state with more HMO members--13 million--than any other.

The ballot measures came in a year when HMOs have been put on the defensive, battling legislative reform efforts in more than 35 states and in Congress, which in September passed a law setting minimum maternity benefits for health insurers.

Voters in Oregon also sided with HMOs on Tuesday, rejecting an initiative that would have banned so-called capitation, a financial payment system in which HMOs pay doctors and hospitals a flat monthly fee to care for patients.

HMOs contend that capitation discourages doctors from recommending costly and unnecessary medical services, but many doctors complain that it creates an unethical incentive to physicians to deny medical services so they can make more money.

But supporters of the two California measures were vowing to “be back next year,” and health-care experts said the defeats in California and Oregon will not curtail efforts by doctors, unions and legislators to seek new restrictions on HMO practices.

“The reasons why over 37 states looked at managed care in the past year have not gone away,” said Geraldine Dallek, health policy director for Families USA, a Washington-based health advocacy group. “I think we’ll see massive efforts in a number of states where no laws passed last year.”

Drew Altman, president of the Kaiser Family Foundation, a national health-care charity based in Menlo Park, Calif., added, “I think there is great public angst about managed care and health insurance, and I don’t think the votes on 214 and 216 should be viewed as a referendum for or against managed care or the health-care delivery system.”

Indeed, backers of propositions 214 and 216 drew encouragement from the fact that the margin of defeat, although wide, was not as great as some experts had predicted. Proposition 214 lost by a margin of 58% to 42% and Proposition 216 lost 61% to 39%.

“The HMO industry touts polls that show 90% of people are happy with them, yet 40% of voters agreed with us that these reforms are important,” said consumer advocate Harvey Rosenfield of the Proposition 216 campaign.

Beth Capell, Proposition 214 campaign manager, said the measure’s chief backers--principally the Service Employees International Union and health advocates--will push for a “patients’ bill of rights” in the Legislature. They will also encourage the California Public Employees’ Retirement System--a big purchaser of health care for state employees, which endorsed Proposition 214--to adopt similar reforms for its nearly 1 million members.

“Given that the opposition spent $5 million to $7 million and we spent $150,000 [on radio and TV advertisements], we think that getting 42% of the vote is an incredible accomplishment,” Capell said.

Some observers say the measures may have been doomed from the start because two unions that had been blasting HMO policies--the SEIU and the California Nurses Assn.--had a bitter falling out over how to draft an initiative. The two sides split off, placed separate measures on the ballot, then bad-mouthed each other for months.

“This was a situation where you had proponents with no money to spend, opponents with big money and very loaded language on the ballot description,” said Altman, whose organization did polling research on the measures. “The loss was predictable.”

Altman said polls showed that despite heavy advertising by opponents, a high percentage of voters were unfamiliar with the two measures weeks before the election. Many voters were probably just plain confused by the complex initiatives, he said.

Proposition 216--the more stringent of the measures with its taxes on health-care mergers --”may not have been on target about what people are most anxious about, which is their health insurance costs, what it covers and doesn’t, and whether it will be there when you need it,” Altman said.

Proposition 214 “was more in the mainstream of what’s happening in the country,” he said. “With some real money behind it and better ballot language, it could have won.”