Healthcare Costs Not Hiked By HMO Liability

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Numerous official studies show liability reform would be both health-enhancing and cost-effective.

  • In a study of 1 million public employees in California, people who can sue their managed care plans already, the Kaiser Family Foundation found the cost of lawsuits and settlements was minimal-no more than 13 cents per member per month.1

  • The Congressional Budget Office reported that giving patients the right to sue would add up to only 1.2% to health care premiums, including costs of so-called defensive medicine.2
  • Washington D.C. based Muse Associates analyzed a provision in the national HMO reform bill, H.R. 1415, that would end federal preemption of workers’ remedies for personal injury and wrongful death. Muse Associates’ January 1998 study of the provision found no increase to, at most, a 0.2% increase in premiums.3

  • Dr. Troyen A. Brennan of the Harvard School of Public Health found that the health care system wastes $60 billion annually to care for injuries attributable to undeterred medical negligence. The landmark Harvard Medical Malpractice Study found that medical malpractice causes 300,000 injuries annually in hospitals alone. The deterrent effect of patient protection laws can save the health care system such staggering human and financial losses.4

Existing HMO liability legislation has not resulted in increased costs and litigation. In Texas, an HMO liability measure, SB 386, which took effect in September 1997, has not raised health care costs or resulted in a “litigation explosion.”

  • The Texas Department of Insurance reported that between September 1997 and March 1998 the increase in total spending per member per month of full service HMOs was only 0.1%.5

  • In written support of similar HMO liability legislation to California state legislators, the author of the Texas libility bill, Texas State Senator David Sibley, writes “When the state of Texas passed its legislation holding managed care organizations accountable, the managed care industry said it would cost over a billion dollars. When an actuarial analysis by Milliman and Robertson for a Texas HMO was performed on the impact of the bill after it was passed, the cost was estimated to be a mere 34 cents per member, per month (about 0.3 percent).”6

  • Senator Sibley continues, “The law became effective on September 1, 1997 and since then not a single case has been filed.” Since Sibley’s letter, only one case has been filed under the Texas law.

  • The New York Times reports, “What lessons does Texas offer? The short answer is that the spotty early evidence does not support a lot of the dire warnings on Capitol Hill about a landslide of litigation.”8

1 Impact of Potential Changes to ERISA”, Kaiser Family Foundation, June 1998

2 “CBO Cost Estimate- H.R. 3605/S. 1890”, Congressional Budget Office, July 16,1998

3 “The Economic Impact of Managed Care Consumer Protection Act”, Muse Associates.

4 “Testimony of Dr. Troyen A. Brennan on Medical Malpractice and Health Care Reform Before the Subcommittee on Health and the Environment”, Harvard School of Public Health, November, 10, 1993.

5 “In Texas, a Laboratory Test on the Effects of Suing H.M.O.’s”, New York Times, Carol Marie Cropper, September 13, 1998, Section 3, pg.1.

6 Texas State Senator David Sibley letter to California legislators in support of AB2436 HMO liability bill, June 24, 1998, pg.1.

7 Sibley letter, pg1.

8 Carol Marie Cropper, Section 3, pg.1.

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