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HMOs Can't See a Win-Win

December 24, 2001

Last year the state's HMOs were still governed by the clueless Department of Corporations, and the HMOs liked that just fine. This year they face the Department of Managed Health Care, created by the Legislature. It is headed by former AIDS activist Daniel Zingale, who has a 100-person customer service staff including lawyers, nurses and other health professionals. The HMOs are trying hard to curb the department's power and need a strong message from employers--their chief source of income--and from the courts to cut it out.

Much of the new department's clout stems from its ability to require "independent medical review" by teams of medical specialists with the power to mediate disputes about denial of treatment. Such panels' decisions are binding on the HMOs.

Independent review benefits both sides. The panels' specialists ensure that good medical judgments prevail for the patient, and HMOs benefit because the panels discourage costly lawsuits and establish an informal body of "case law''--a consensus on right and wrong that helps HMOs shield themselves from future lawsuits. However, many HMOs are fighting independent review, both in California and in the other 40 states that have adopted it. Their recent salvos are sure to ricochet back and hit them.

Earlier this month, Blue Shield of California sued the department, arguing that it overstepped its authority when it asked independent reviewers to evaluate the plan's decision to deny a weight loss drug that doctors said an obese patient needed for survival. Blue Shield's lawyers argue that since the health plan excludes outpatient weight loss drugs from the patient's policy, the department lacks the "authority to require us to provide service which is not part of the contract ... [or to order] an independent medical review.''

The health plan may have a narrow, legalistic point, but it is politically, medically and even fiscally misguided. Undermining independent review only strengthens the argument of trial lawyers that patients need broader state and federal rights to sue HMOs.

Large employers, who are the biggest customers of managed care, should use their clout on behalf of independent review. However, the ultimate right to seek independent review may lie in the hands of the U.S. Supreme Court, which in mid-January will decide whether to support or overturn state laws allowing patients to seek an independent opinion if their insurers deny a treatment or a test. The Supreme Court inherited the issue after lower courts issued contradictory rulings last year.

Independent medical review is supported by laws in 41 states and by Democratic governors like Gray Davis as well as Republicans like former Gov. Tommy G. Thompson of Wisconsin. Thompson, now the Bush administration's top health care official, signed a law creating independent review panels in 2000 when he was governor. One of the few commonalities in the GOP and Democratic patients' bills of rights that died in Congress this year was independent medical review panels to mediate disputes.

Health care costs are expected to soar at four times the rate of inflation next year. The review panels might not reduce overall cost, but they would certainly keep more money in good medicine and less in litigation.

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