HMO Reform, Davis’ Way

Earlier this year legislators in Washington loudly promised to pass bills protecting patients from HMO abuses even as they larded those bills with special-interest provisions too controversial ever to make it into law. Congress’ cynical politicking made voters furious.

Now, legislators in California have a historic opportunity to meet the promises Congress failed to keep. It comes in the shape of an outline that Gov. Gray Davis released last week detailing which HMO reforms he’s willing to sign into law now.

By revising pending bills in the direction of the governor’s specifications, legislators can transcend the impasse that stymied HMO reform through much of the 1990s, when a Democratic-controlled Assembly and Senate passed hundreds of measures that Republican Gov. Pete Wilson promptly vetoed.

Some legislators are already railing against the Davis administration’s middle road. They say they will support his plan only if he promises to sign their various bills granting favors to doctors, lawyers, employers, HMOs, nurses and other special interests they have agreed to champion.

The most aggressive special interest of all is the state’s trial lawyer lobby, which wants any HMO reform to be tied to the lifting of virtually all restrictions on patients’ rights to sue health plans.

The Davis administration has proposed allowing patients or their families to sue only when an HMO’s treatment denial causes death, loss of a limb or other “substantial physical harm.” Davis staffers say they are open to negotiations on how to improve that clearly imperfect wording, but those negotiations could be endless.

Rather than allowing divisions over lawsuits to sink Davis’ entire package of much-needed HMO reforms, legislators should focus first on passing two common-sense reforms on which the two sides are not far apart:

* Requiring external review that is truly independent of health plans. HMOs say Davis’ plan makes it too easy for patients to appeal their decisions and that only treatments exceeding a given dollar threshold should be subject to review. The state’s trial attorneys, on the other hand, say Davis’ plan isn’t permissive enough because it explicitly allows patients to appeal only decisions involving care that a physician has recommended. Davis’ plan is actually a viable compromise between these two extremes.

* Focusing state oversight of managed care. Some legislators are denouncing the governor’s decision to house a new Department of Managed Care within the state’s Business, Transportation and Housing Agency. They correctly point out that the agency has failed to properly manage the state’s current HMO regulator, the Department of Corporations, and that the state’s Health and Human Services Agency has more experience in medical issues and consumer complaints. But if the governor is set on having his new department within the business agency, legislators can still give it clout by clarifying its mission.

While Davis’ plan says the department should evaluate the solvency of physician groups, legislators should go further and direct the department to study a key cause of insolvency: the unfairly low rates that HMOs pay some physician groups. In Los Angeles County, some plans pay pediatricians a flat $10.15 per month per patient. And while Davis’ plan asks HMOs to “make their treatment guidelines public,” legislators should require that those guidelines--just glorified sales brochures in some plans--specify covered treatments and drugs.

The most outspoken critic of Davis’ proposed HMO reforms is Jamie Court, director of a Santa Monica advocacy organization that works closely with the state’s trial lawyers. Court says the governor’s plan is wrongly centered around “a private, bureaucratic review system, not a public civil justice system.” In other words, Court wants HMOs regulated by lawyers and juries in courtrooms and federal officials in Washington. The fact is, however, that the present health care system is a largely private one. Until the whole nation agrees to overhaul that system, legislators should choose their reforms carefully.