Democrats Kill Wilson Plan to Create Agency Overseeing HMOs
SACRAMENTO — State Senate Democrats on Thursday killed Gov. Pete Wilson's plan to strengthen regulation of the health maintenance organization industry by creating a state Department of Managed Health Care.
Rejection of the proposal on a party-line 22-15 vote means that oversight of health maintenance organizations will continue under the Department of Corporations, unless Wilson and Democrats in the Legislature can reach a compromise in the next two months.
In California, the managed care industry has come under heavy criticism for allegedly placing cost savings ahead of high-quality care.
Common complaints include charges that HMOs substitute cheaper drugs rather than the most effective recommended by doctors; that women undergo mastectomy surgery as outpatients rather than being admitted to hospitals; and that nursing staffs are being cut back so severely that patient treatment is endangered.
About 18 million Californians, more than half of the state's population, are covered by managed care plans.
Wilson's reorganization plan would have transferred regulatory responsibility for HMOs from the corporations department, which has been criticized for lax oversight, to the proposed managed health care department, which would have been given beefed-up regulatory powers.
But Sen. Herschel Rosenthal (D-Los Angeles), a legislative expert on health insurance issues, charged that the HMO regulatory process in California is in need of "major surgery." Instead, he said, Wilson "has offered a Band-Aid solution."
The governor lashed back, accusing Democrats of sinking his program for partisan purposes. "It provides protection for the people and oversight of HMOs. It does everything the Democrats have been calling for. But when the governor submits it, they reject it," said Wilson's spokesman, Ron Low.
At the heart of the issue is a high-stakes fight among insurers, providers, patients and public officials over how to best regulate the estimated $50-billion-a-year managed care industry.
Consumer advocates favor a health- or consumer-oriented department or individual. In contrast, the industry generally supports retaining regulatory control under the administrative umbrella of the state Business, Transportation and Housing Agency, which includes the Department of Corporations.
Rosenthal said that the umbrella agency "has shown more concern for the financial health of HMOs than for the medical health of consumers. We need a new lead agency concerned about quality health care."
