Charting an HMO Cure

More than 60 managed care reform bills are now streaming toward Gov. Gray Davis’ desk, reflecting a lot of pent-up frustration. But people who follow health care policy have their eyes fixed on just one: a measure by state Sen. Liz Figueroa (D-Fremont) that would greatly expand Californians’ ability to press pain and suffering lawsuits when their HMOs deny them needed medical care.

The Figueroa bill is far from the cure-all that its backers claim, but if implemented in careful conjunction with two other bills enhancing patient rights, it could do much to help the nearly 500,000 Californians that a UC Berkeley survey found were denied care or treatment by their health plans in 1996. About half of respondents said their health suffered as a result.

Last week, Davis finally gave state leaders in business and government the guidance they had long sought on what sort of liability legislation he’s willing to sign into law. Davis is expected to ask Figueroa to limit her bill to cases in which patients suffered “serious or catastrophic injury,” and then only if an HMO official had turned down an HMO doctor’s request for treatment. That definition is too narrow, leaving no legal recourse, for example, to a patient denied needed care not by an HMO executive but by a physician influenced by HMO cost-cutting pressures.

Fortunately, the governor’s other suggestions chart a sensible, centrist course.

Davis is right to demand some protection for HMOs from patently frivolous lawsuits, and to scold legislators for failing to tie liability reforms to the creation of a well-coordinated, statewide HMO appeals system. The right balance will treat patients fairly while not letting costs spiral out of control. The experience of other states that have enacted strong reforms, particularly Texas, indicates this can be achieved.

The first step in a proper appeals process would allow patients to see health plans’ criteria for denying treatment. A pending bill by Assemblyman Scott Baugh (R-Huntington Beach) would guarantee that right. Gov. Pete Wilson vetoed a similar bill last year; Davis should commit to signing it.

If patients still believe they have been treated unfairly, they should be able to appeal to external reviewers, medical experts who are truly independent from the HMO. External review would also help HMOs by establishing a kind of “case law”--a public record of medical experts’ decisions that HMOs can use to avoid lawsuits by doing the right thing: treating patients according to accepted medical best-practice standards.

A pending external review bill by Sen. Adam Schiff (D-Burbank) would take care of the review issue. But HMOs want an amendment requiring patients to get approval from their HMO doctors before requesting external appeal. That’s ridiculous. Obviously, HMO doctors may be reluctant to help patients challenge their own employer. On the other side of the issue, the state’s powerful trial-lawyer lobby should withdraw its unfair demand that external review decisions favorable to an HMO be inadmissible in court, while unfavorable decisions may be used.

The Figueroa bill has its limits and drawbacks. It will not extend any new rights to the approximately 5 million Californians who are insured through large private employers that fund and manage their own health insurance programs. That’s because a federal law called Erisa provides special exemptions for such plans from state laws. Erisa can only be changed by Congress, which is currently riven with cavernous divisions over managed care reform. But if properly implemented, the Figueroa, Schiff and Baugh bills will go a long way toward fixing a system everyone knows is broken.