Muckraking Book Exposes HMO Abuses, Offers New Policy Solutions; Authors Predict HMO Liability Will Force Companies To Compete On Basis of Quality

Published on

California’s Experience With HMO Reform Offers Lessons For Nation

The authors of a new book indicting corporate medicine and offering recommendations for reform discussed their findings that for-profit managed care companies have betrayed American patients and physicians, during a speech at the National Press Club in Washington, D.C. today.

Fresh from a legislative victory that established HMO liability in California, the authors of Making A Killing: HMOs and The Threat To Your Healthsuggested that HMOs would soon be liable for the quality of their services nationally. Jamie Court, a California consumer advocate who sponsored California’s new HMO liability law, and co-author Francis Smith predicted that Wall Street analysts would have to start judging HMOs based on the quality of their services, not just their short term profits — forcing HMOs to compete on the basis of quality, not just cost.

Court and Smith discussed the extensive case studies in their book and offered recommended reforms for the nation ranging from those enacted in California recently, including the patient’s right to sue an HMO for damages, to establishing public-utility type control over HMOs by creating a not-for-profit standard for managed care organizations.

“The new regime of HMO accountability for California’s 23 million managed care patients gives momentum to a national movement to force HMOs and their investors to be as serious about managing care as they have been about making profits,” said Court, advocacy director at the Santa Monica-based Foundation for Taxpayer and Consumer Rights. “These reforms are a model for the nation. But if HMOs do not defer to patients’ legal leverage and pay attention to quality, or quash a new national liability law through cash-register politics, then the not-for-profit model of medicine will inevitably take hold, likely precipitated by a financial meltdown that leads to a taxpayer bailout and subsequent universal health care reform.”

“If Wall Street accepts the reality of HMO accountability and forces companies to compete on the basis of quality care, the entire health system may save huge sums, as untold human misery is avoided by timely delivery of needed care,” said Smith, Senior Fellow at the Massachusetts-based Institute for A Civil Society.

from Making a Killing: HMOS and the Threat to Your Healthby Jamie Court and Francis Smith, Common Courage Press, 1999.

Congress should amend the Employee Retirement Income Security Act of 1974 or ERISA to restore the right of 125 million Americans to sue HMOs for damages in state court. HMOs should face the same level of accountability that every other industry does.

States can enact their own HMO liability laws. Until ERISA is reformed, states can establish a new “corporate negligence” cause of legal action. Texas and more recently California have done just that.

Consumers should create an independent, nonprofit consumer watchdog association funded by voluntary contributions and governed by a board with a majority elected by members. This is modeled on Consumer Utility Boards operating in three states to guard against utility fraud and unfair rates.

Prohibit mandatory and secret arbitration of medical grievances as a condition of health coverage. Giving up the basic right of public trial as a condition of coverage is already prohibited in a majority of states. Arizona enshrines this prohibition in its state constitution.

Require prior approval from regulators before HMOs and insurers can raise their premiums or lower the rates they pay doctors via capitation. Most states require insurance companies to get state approval for such changes in property and casualty insurance. But no such system is in place for health insurance, despite the life-and-death stakes involved.

Ban full-risk capitation. Some groups of doctors accept all risk for every aspect of a patient’s care, pitting the doctors’ financial self-interest against every medical decision. This practice completely distorts the doctor-patient relationship.

Prohibit HMO bureaucrats from second-guessing physicians who examine patients. An HMO should not be able to deny physician-recommended treatment to a patient unless another equally qualified doctor has examined the patient and made a determination that the care is not warranted.

States should set state staffing levels so that care is available to patients based on the acuity of their illness, and not on whether they are in a hospital or nursing home. Typically, staffing protections only exist for the most severely ill patients in critical care units. Lower standards encourage HMOs to shunt patients who should be in a hospital to so-called skilled nursing or nursing homes.

Mandate public disclosure of data about health care quality, financial information and complaints and arbitrations against health care organizations. HMOs should be required to disclose all information relating to quality of care, including how they make decisions. Industry-sponsored groups like the National Committee For Quality Assurance look at value as something measured by costs, rather than the clinical needs of patients

Prohibit health care businesses from selling medical records without express written consent. It’s easier to find out if someone has cancer or AIDS than to get a list of their video rentals.

End for-profit, investor ownership of HMOs and health care businesses. This may become a reality, with public utility-like controls exerted on the industry that guard against the accumulation of significant wealth, if financial failures of more HMOs and physician groups ensue.


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.

Latest Videos

Latest Articles

In The News

Latest Report

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More articles