California pioneered health maintenance organization medicine, and now it is pioneering its reform. Earlier this month, Gov. Gray Davis signed a new law allowing patients who are seriously harmed to collect punitive damages from HMOs that deny them necessary treatment.
The House-Senate conference committee meeting soon to reconcile HMO reforms passed by both houses should heed this lesson from the state where more than 90 percent of those insured are covered under some form of managed care, and where a populist uprising powered the most ambitious statehouse overhaul of HMOs yet.
While every politician on Capitol Hill claims to be an HMO reformer, the litmus test of real reform has become the patient's right to sue an HMO without limits on damages.
This was a vital part of the patients' victory in California, where the law protects the right to recover unlimited punitive and compensatory damages. Patients and their doctors need this full legal leverage when requesting necessary treatment from billion-dollar companies that have very little else to fear. HMO behavior will not change without the specter of such unlimited financial pain for wrongdoing. Patients across the nation deserve such a big stick when dealing with HMOs, even if they never have to use it.
In fact, a Texas HMO liability law in effect since September 1997 has resulted in only six lawsuits despite the availability of punitive damages in that state. It has not increased health-care costs either, as annual premium increases in Texas have been below the national average.
Texas doctors report, however, that they are receiving more deference from HMOs when requesting medically necessary treatment for their patients, according to the Texas Medical Association. This keeps health costs low. Patients are receiving the care they need in a more timely way so the system does not have to bear the higher treatment costs for patients whose conditions have deteriorated because they did not receive preventive care.
"We determined that managed-care companies should not be treated any differently than other profit-making business enterprises that are subject to liability under traditional tort laws," said the Texas law's author, State Sen. David Sibley. "Because HMOs and managed care companies often apply a financial filter to determine treatment denials, their liability must not be artificially limited by a compensation cap. Such restricted responsibility would mitigate against approval of the most expensive treatment, such as cancer care."
Today 125 million Americans who receive health coverage through private-sector employers can recover no damages when harmed by an HMO's denial, only the cost of the benefit denied. HMOs have no incentive to provide expensive treatment deemed medically necessary because they are liable only for what they should have provided in the first place.
Congress should follow the lead of California and Texas. The penalty for when an HMO denies treatment considered medically necessary to its clients should not be limited by a congressional price tag.
*Jamie Court is advocacy director of the Foundation for Taxpayer and Consumer Rights and co-author of 'Making a Killing: HMOs and the Threat to Your Health' (Common Courage Press).
(c) Copyright 1999. The Christian Science Publishing Society