HMO Laws: a Middle Road

Managed care, once regarded as a sure way of controlling health care costs, became strikingly unmanageable in 1997. Leading HMOs posted dismal earnings, and over half of the nation’s 650 HMOs lost money. Forty states passed laws that guaranteed certain medical services, while competition kept a lid on premium increases. As icing on this woeful cake, two national polls showed consumer trust in HMOs plunging.

The year ought to have inspired Congress to seek ways of protecting both consumers and HMOs. But instead, legislators are maneuvering to find political advantage in the crisis. Republican proposals seem mostly aimed at winning favor with investors who believe HMOs could put a tighter limit on costs. Senate Republicans met in November with large employers and health insurers to discuss a “war” against regulation of managed care. Democrats, trying to score points with consumers, countered with a news conference to condemn “the Republican war on patients’ rights.”

This kind of Beltway posturing will do nothing to raise health care quality or control costs, which are now rising at twice the rate of inflation, much as they did in the bad old fee-for-service era of medicine. What’s needed is moderate legislation that protects consumers while preserving HMOs’ freedom from government micro-management. That is what California could get if state legislators heed the task force set up to advise Gov. Pete Wilson on managed care reform.

The panel, meeting for the last time today, has listened carefully to both sides. Managed care officials are understandably troubled that consumers and government seem eager to limit their ability to draw the line on medical spending by deeming some services more essential than others. But what irks the public the most, opinion polls suggest, is not that HMOs are drawing lines but that they are doing so in secret and allowing no debate about their decisions.

The Wilson task force proposes some sensible solutions. It recommends that HMOs be required to publish their approved list of prescription drugs, disclose consumer complaints and establish standard descriptions of what they offer so consumers can do comparison shopping. This rightly assumes that with decent information consumers and employers can make better health care choices.

The task force would also establish a new state agency to regulate managed care, consolidating oversight that is scattered and weak. The task force calls as well for an “unbiased, independent, third-party” state review process for resolving HMO members’ complaints.

HMO officials, already stung by criticism, may not welcome disclosure and independent oversight. But they should understand by now that resistance would only fuel cries for far more intrusive legislation and government regulation. For instance, HMOs could see their costs soar with passage of a congressional bill, introduced by Rep. Charlie Norwood (R-Ga.), that would expand consumers’ ability to sue HMOs and bar any payment plans that encouraged doctors and nurses to limit spending.

Health care policy experts from groups as far apart as the conservative Heritage Foundation and the liberal Urban Institute are reaching agreement that more stringent HMO oversight is needed. The question is whether lawmakers can stop sniffing the political winds long enough to respond usefully. The Wilson task force has given state legislators a solid framework for action. Congress would do well to order a copy of those proposals and give up the dueling news conferences.