Hard Path to HMO Reform

The old saw, “sometimes the cure is worse than the disease,” must have gone through Gov. Pete Wilson’s mind when a raft of HMO reform bills hit his desk last year. Rather than signing the piecemeal bills, Wilson appointed a task force to study how consumer rights could be protected without rendering HMOs insolvent or micro-managing their medical decisions. Several weeks ago, the task force issued more than 100 worthwhile proposals. Wilson now has sent legislators a rather vague letter that falls far short of endorsing the panel’s ideas but invites cost-effective reforms with these aims:

* Expanding access to health care. Wilson rightly asks legislators to “aggressively explore ways” of helping small businesses form pools to purchase low-cost insurance--tax incentives would be a start. Most of his recommendations, however, are too unspecific and qualified to really protect consumers. For instance, he writes, “A second physician’s opinion, when medically necessary, should be available to patients. If the plan’s network does not include a provider qualified to give the second opinion, then an out-of-network doctor may be used.” Were the Legislature to pass a bill with such wording, however, it would not offer HMO consumers any protections they do not have already. HMOs, for instance, could deem the second opinion “medically unnecessary.” And since most plans have “qualified” doctors, it would be virtually impossible for consumers to get second opinions from doctors not employed by the HMO.

* Improving oversight. Wilson echoes the task force’s recommendation that a new state agency be created to oversee HMOs and says the agency should be headed by an “individual regulator.” The gubernatorial appointees who have run the current HMO oversight agency, the Department of Corporations, have been lax regulators at best. Thus it’s vital that the new agency be headed either by a popularly elected director or by a state board appointed jointly by the governor and legislators. A strong, publicly accountable agency director is crucial because a quirk in federal law exempts most HMO plans from the state consumer protections that applied to old-fashioned fee-for-service medicine: When members sue HMOs for denying treatments that the HMO’s own doctor has recommended, many HMOs claim that they don’t practice medicine, only provide coverage, and thus cannot be held liable for malpractice.

Last year, a backlash against that practice led Texas voters to pass and Gov. George W. Bush to sign a law explicitly stating that managed care enrollees can sue if a plan fails to meet standards of “ordinary care” in denying or delaying payments. The law also permits patients to take HMOs to court for medical negligence. Assemblyman Martin Gallegos (D-Baldwin Park) has proposed a ballot initiative that would bring a Texas-style law to California.

Such a law would hardly be the kind of cost-effective approach to managed care reform the governor is seeking, and so to keep public frustrations from boiling over, Wilson and the Legislature must pass genuinely useful consumer protections into law this year.

California voters rejected two 1996 ballot measures promising sweeping managed care reform, but recent polls show high public dissatisfaction. Without genuine reform, there will be little to keep the Texas backlash against managed care from spreading.