Wilson Unveils Proposal for HMO Reforms

In his long-awaited proposal for reforming California’s health care industry, Gov. Pete Wilson on Wednesday recommended several key changes, including the creation of a state agency to regulate HMOs.

“Managed-care reform is another opportunity for us to provide people the kind of needed, important change we can achieve when we work together for the common good of California,” Wilson said in a letter to the Legislature, which will determine the fate of the governor’s recommendations.

In addition to establishing a new state department, Wilson called for easier consumer access to specialists and prescription drugs, minimum hospital stays offered for certain procedures and more information for the public on the quality of medical care--which patients could use for “comparison shopping.”

Wilson’s proposal is the outgrowth of a bitter political battle he has waged in the last year with legislative Democrats, who have accused the Republican governor of going too slowly and not far enough in bringing more government oversight to the managed-care industry.

As the momentum for lawmakers to regulate HMOs more closely has swept across the state and nation--President Clinton highlighted the issue in his State of the Union speech Tuesday--Wilson and Republicans in the Legislature have joined Democrats in calling for reform. The differences have been ones of degree.

The governor last year stalled the managed-care reform movement in California when he vetoed several HMO bills on the grounds that he was waiting for completion of a comprehensive study by a task force he appointed, but which did not always follow his bidding.

The study was completed earlier this month, and Wilson’s proposal adopted many of its key recommendations.

In his letter to the Legislature, the governor said that he shares with reformers “a desire for effective and fair managed-care reform,” and that he hopes the improvements will be enacted this year.

“We are well aware of the pressures to recast California’s system of managed care,” Wilson said. He added, however: “We must take care to avoid quick fixes which are not well thought out and may jeopardize California’s long-term health.”

“Health care is a cost of doing business,” Wilson said. “Increased costs mean increased premiums” payable by employers and employees. High costs of health care, he said, can “inflict real injury” on the California economy.

Response by Democrats to the governor’s recommendations was lukewarm, though they promised to give them a fair hearing. One consumer group, however, called Wilson’s plan “a failure.”

Chairman of the Assembly Health Committee, Martin Gallegos (D-Baldwin Park), described the recommendations as “disappointing.”

Gallegos said Wilson addressed in a “vague” way some of the same concerns that the Legislature, often with bipartisan support, pursued last year.

He praised the governor for recommending that HMO oversight be removed from the Department of Corporations--which Democrats have criticized for operating with a pro-business bias--and given to a separate agency.

But Gallegos said a joint Senate-Assembly committee controlled by Democrats will examine closely how the new entity should be set up. He also questioned whether the Legislature would approve a single, governor-appointed regulator to run the new department.

Rather, Gallegos said--indicating where the fight over Wilson’s proposal may flare up later--a full board representing diverse interests should take charge of HMO regulation.

“We’ve been down the road of an individual regulator all this time and we see this doesn’t work,” said Gallegos, referring to a succession of overseers with the Department of Corporations.

Allan Zaremberg, president of the California Chamber of Commerce, called the recommendations a “positive step,” and lauded Wilson’s statement that cost increases must be considered when any new requirements are imposed.

“He’s asking for a comprehensive review, which is something we would ask the Legislature to do,” said Zaremberg, who sat on Wilson’s health care task force and is part of a coalition of business and health care firms.

Michael J. Hawkins, lobbyist for Kaiser Foundation Health Plan, said Wilson’s plan was not specific enough, but added, “Generally, we’re supportive. The caveat is we want to see the specific language.”

Jamie Court, of the Consumers for Quality Care activist group, called Wilson’s plan a failure. He said that because Wilson believes HMO reform should rely on the free market instead of government mandates, the proposal is flawed.

Court called the plan “a prison sentence for HMO patients who will have no means to hold accountable billion-dollar [HMO] corporations.”

He referred to Wilson’s preference for arbitration over filing lawsuits to settle disputes arising from the withholding of care by HMOs.

That concern, and criticism of HMOs sacrificing medical care for cost savings, are repeatedly mentioned as major irritants by the critics of managed care.

Wilson, in his proposal, said the relationship between medical care and medical costs should be spelled out clearly to the public and to patients.

Meanwhile, as Wilson unveiled his plan Wednesday, Democrats in the state Senate and the Assembly tried and failed to override Wilson’s veto of several of last year’s HMO reform bills.

One bill (SB 1220) by Sen. Hilda Solis (D-El Monte) would have required health insurance plans to cover such items as glucose monitors and test strips for diabetes patients. Another bill, (SB 296) by Sen. Betty Karnette (D-Long Beach), would have mandated health insurers to cover prostate cancer exams for men.

With 27 votes required for a veto override, the Solis proposal failed, 24-13, while the Karnette plan was rejected 23-13. Democrats supported the override; Republicans opposed it.

In the Assembly, a bill (AB 536) by Gallegos that would require health plans to disclose to the public their criteria for authorizing or turning down treatment procedures was defeated on an override attempt 43 to 28. An override would have required 54 votes.

Another bill, (AB 760) by Assemblywoman Carole Migden (D-San Francisco), that would have allowed more access to bone marrow transplants in breast cancer treatment, was defeated on an override vote 43 to 22. The votes in the lower house were also along partisan lines.

Times staff writers Dan Morain and Dave Lesher contributed to this story.