Davis Must Help Reform HMOs

President Clinton has proposed to add a prescription drug benefit to Medicare. A couple of days later, Medicare HMOs declared they would cut current benefits or raise premiums for most of their 6 million senior subscribers, effectively undermining Clinton’s plans. Obviously, our efforts at health care reform are in as much of a morass as the medical system itself.

It’s little wonder that Gov. Gray Davis so far has publicly avoided the issue in which the basic tenet of medical ethics--to put patient care first--has been turned upside down. To cut costs, HMOs have set up a system where, on paper at least, doctors can make more money for not treating patients. And now HMOs are charging double-digit premium increases for less treatment.

Paul Ellwood, founder of the managed care concept, recently said, “For those of us who devoted our lives to reshaping the health system trying to make it better for patients, [managed care] has been a profound disappointment.” Ellwood now acknowledges, “Ultimately this thing is going to require government intervention. The question is what form government intervention will take.” One thing for sure, he said, reform is not going to come from within the HMO industry itself.

Maybe that’s because HMOs are more obsessed with managing their own profits than worrying about our care.

But despite the challenges, California’s new Democratic governor, who presides over a state where the two houses of the Legislature are controlled by his own party, has more power than almost any other elected official in the nation to shape a better health care system. Currently under consideration are plans to restructure HMO regulatory oversight, provide second opinions and allow patients with private industry coverage the same right to sue an HMO for damages as public employees now have. Davis is expected to announce his HMO reform plan this month.

As a first step, holding HMOs and those who work on their behalf legally accountable for damages when medically necessary care is delayed or denied would help clarify the ground rules for reckless companies and afford HMOs a last opportunity to do what they say they can do, which is to manage care and costs. In Texas, a similar 1997 law enacted under Gov. George W. Bush has resulted in only one lawsuit and few costs, but doctors and patients report they are now receiving more deference from fearful HMOs.

Gov. Davis must recognize that the problems in California’s health care system mimic those in our state’s politics in general, where special interests carve up policy without input from those being governed. Davis must not yield to those who want him to build on mud just because they own it. For instance, a proposed reform advocated by the doctors’ lobby to make liable individual HMO medical directors who deny physician requests for treatment may have worked well for the public two years ago. Today it would be of marginal help, because HMOs give doctor-run medical groups a fixed budget for all patient care. In other words, now a family physician at a medical group may have as much of a financial incentive to deny treatment, or at least not to recommend it, as an HMO medical director.

The greatest pitfall for Davis would be to defer to the HMO industry’s own argument that to embrace reform would lead to greater costs at a time when premiums already are escalating. But this is a misguided notion, as shown in Texas, where reforms put a check on rising costs by getting patients the help they needed early on and avoiding more costly catastrophic care later.

In California, premiums are rising and quality is falling for the same reasons reforms are urgently required, namely, the industry’s own mismanagement, greed and failure to deliver on its promises.

The critical question for Davis is what the cost of this crisis is, and who must bear it. The only way there will be true competition based on quality is when good companies are rewarded and bad companies are punished. Until then, market forces will never work as a control of renegade corporations. And if this does not happen, the growing crisis will be not only the legacy of HMO medicine but of Davis as well.