Californians Have Seen Only Good Results From Right To Sue HMOs

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Deterrent Effect Is Model For the National Patients’ Bill Of Rights

The Foundation for Taxpayer and Consumer Rights announced that the bipartisan, federal patients’ bill of rights, which President Bush said he would veto, deserves a second look, especially a look in the direction of California, which has the strongest patients’ rights law in the nation.

The White House claims that the Kennedy-McCain bill benefits lawyers, not patients, because it would allow patients the right to sue HMOs for as much in damages as is allowed under state law against other industries, instead of capping damages at a lower level.

California’s right-to-sue law has been in effect since January and,
despite the unlimited damages it provides for, there has not been a single lawsuit filed. Instead, HMOs appear to be deferring more to patients’ requests for treatment, according to the first data to emerge from the state’s HMO regulator.

“California has test-driven the patients’ bill of rights and, at this early stage, it appears to be a strong consumer protection model,” said Jamie Court, executive director of the Foundation For Taxpayer and Consumer Rights.

California’s patients’ bill of rights provided for a host of new rights, such as access to second opinions, a new HMO regulator, an independent review by doctors of HMO denials of treatment and, as a final resort, the right to sue the company.

When the measure was proposed, the HMO industry claimed that there would be an explosion of frivolous litigation and increased health costs, and that it would benefit only attorneys.

In practice, state-collected data from the first year of California’s reforms show that most of the 14,000 calls a month received by the state’s Department of Managed Health Care are routinely handled. State regulators settle these disputes with minimal hassles or resistance from HMOs.

In most cases, HMOs appear to be giving patients what they want, rather than facing an independent review process that allows independent doctors to review HMO denials of care. The independent review process is the corridor to the courtroom because patients must use the system before suing. This implied threat, it seems, is enough to make HMOs defer in all but those cases where they are certain they are right in denying care.

In the 165 cases that went to independent reviewers in the first six months of the new laws, HMOs won 65% of the time. In 20 other states, the same independent reviewing agency is deciding cases evenly between HMOs and patients, with a consistent 50-50 split.

With the right to sue as a deterrent, HMOs in California appear to be letting only those cases they believe they can win go to independent reviewers; they are settling the rest amicably.

California’s situation is not unique. There have been very few lawsuits in any of the seven HMO right-to-sue states. Texas has had an HMO liability law in effect since 1997 and only six lawsuits have been filed. Doctors in Bush’s home state have similarly reported, however, that HMOs have deferred more to patients since the law took effect. Premiums in Texas have risen since 1997 at less than the national average.

State right-to-sue laws, however, are no panacea. A federal patients’ bill of rights is needed because no state law can ever regulate the health plans of large, interstate employers that have so-called “self-funded” health plans. Patients in these federally regulated plans who are wrongfully denied services are unable to hold the plans accountable unless new federal legislation is enacted.

“If President Bush is truly interested in sound policy and not protecting the insurance and HMO industries, he will replicate California’s model,” said Court.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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