Put HMOs in Their Place

California pioneered managed care for the nation, for good and for ill. Many of its innovations have been emulated in other states. But no one in his right mind would copy California’s ineffective and peculiar way of regulating HMOs.

Other states sensibly regulate through departments specializing in health or insurance, but California’s HMOs are overseen by the Department of Corporations, which specializes in financial lending and investments. It is part of a state division that’s even further removed from health care: the Business, Transportation and Housing Agency. As a recent report by state Auditor Kurt Sjoberg put it, the Department of Corporations has neither “broad expertise in health care issues nor the insight necessary for regulating health plans.”

Today the state Senate is ready to approve a bill by Sen. Herschel Rosenthal (D-Los Angeles) that would create a new Board of Managed Health Care--the first critical move in a needed overhaul. The Assembly is expected to pass a twin measure, and it should go to Gov. Pete Wilson’s office by next week. But there it may face resistance.

The governor’s staff has argued that HMO oversight should remain in the Business, Transportation and Housing Agency because managed care is a business. But it’s not HMO finances that need better oversight. The Rosenthal bill rightly places the new agency in the Department of State and Consumer Services, to consolidate health care oversight in a single place (Consumer Services already oversees doctors and nurses) and to utilize an agency skilled in patient protection.

Wilson also wants HMO oversight headed by a single gubernatorial appointee, while Rosenthal proposes a board of three gubernatorial and two legislative appointees. That would give the governor what he wants--enough clout to drive policy. But the five-person board would be subject to open-meeting laws, preventing squirrelly back-room deal-making.

When the state began overseeing managed care in the late 1970s, the industry was an experiment in health care, covering 3 million people. Today managed care has become virtually synonymous with health care, a $50-billion industry covering 18.4 million people. Only good can come of the changes embodied in the Rosenthal bill. Wilson should turn a deaf ear to HMO lobbyists and sign it.