Copyright 1999 The Seattle Times Company
October 06, 1999, Wednesday Final Edition
SECTION: NEWS; Pg. A3; CLOSE-UP
LENGTH: 1137 words
MANAGED-CARE REFORM -- CONSUMERS MAY BEAR COST OF CHANGE
BYLINE: ANDREW JULIEN, MATTHEW KAUFFMAN; THE HARTFORD
THE HOUSE OPENED debate today on how
to give patients new rights in dealing with health-maintenance organizations and
other managed-care plans. The early favorite, backed by Democrats but with
enough GOP support that it was expected to pass, would give patients the right
to sue an HMO.
As health-maintenance organizations and doctors
continue their tug of war over patient care, a cadre of the nation's most
powerful trial lawyers is preparing to throw its weight into the battle. If
these lawyers - some fresh off huge victories that produced billions of dollars
in settlements with the tobacco industry - prevail in their newest endeavor,
their efforts could shake the very core of managed care.
Where all this
will lead is uncertain. Although lawsuits that challenge managed care could lead
to changes that consumers might applaud, they also could drive health-care costs
even higher, potentially putting insurance out of reach for more Americans.
Focus of lawsuits
Many people expect that the lawsuits
will involve a direct assault on some of the fundamental building blocks of
managed care. The financial incentives HMOs use to keep down costs and their
ability to second-guess physicians, for example, have come under broad attack.
"The types of legal theories these lawyers are talking about get . . .
at the heart of the methods HMOs use to control costs," said Larry Levitt,
director of the Changing Health Care Marketplace Project at the Kaiser Family
Wall Street clearly took the threats seriously, as investors
sent stock prices tumbling for insurers such as Aetna U.S. Healthcare and CIGNA.
But Levitt also warned that it is premature to draw too many conclusions
about the ultimate outcome. "What we're dealing with here are fairly vague
threats of lawsuits without a lot of detail," he said.
The lawyers are
not talking about their specific strategy, staying mum both on the legal claims
they will make and the remedies they will seek.
Any lawsuits, however,
will have to find a way around ERISA, a 25-year-old federal law that shields
health insurers from most state regulations and lawsuits.
But ERISA isn't bulletproof. Courts around the country have
knocked some holes in that protection, and Congress is considering legislation
that would give patients new rights to sue insurers.
The U.S. Supreme
Court has agreed to hear a case in which the justices could rule on whether
ERISA imposes a legal duty on insurers to place the health of its customers
above all other considerations, including profits.
managed-care companies have scuffled with doctors, politicians and
public-interest groups, and the result has been incremental steps toward change.
But with a huge class-action lawsuit in the offing, the industry could
find its foundation shaken by a single judge's ruling.
heavyweights taking aim at managed care are several veterans of the
multibillion-dollar tobacco litigation, as well as the government's top lawyer
in the Justice Department's antitrust case against Microsoft. With hundreds of
millions of dollars in fees awarded in the tobacco cases, the lawyers may have
the financial muscle to endure a lengthy court battle with the formidable
"It's a long time coming. What's happened,
obviously, over the last five years or so is that managed care has become a real
target of opportunity for state legislatures and the plaintiffs' bar. This is
just a continuation of that trend, really," said Thomas Mayo, an expert on
medicine and the law at Southern Methodist University in Dallas.
is really an attack on the underpinnings of the theory of managed care," he
said. "It's pretty hard to do managed care if you can't set up gatekeeping and
require prior authorization for nonemergency procedures and things like that."
The major national associations
that represent health insurers said a full assault on managed care would have an
unpleasant outcome for patients and consumers.
"It is apparent now what
the agenda is: It is to eviscerate and dismantle managed care," said Phil
Blando, a spokesman for the American Association of Health Plans in Washington.
"You're going to see a return to the whole fee-for-service type of
mechanism," Blando said. "Once people start focusing in on what this all means
and what happens if we all go away, you're going to see people wake up and take
Higher costs for medical services would be passed on to
employers - and then to employees - because insurers already operate at low
profit margins, said Don Young, chief operating officer of the Health Insurance
Association of America.
"The ability of health plans to keep costs down
and improve quality of care is threatened by this," Young said.
campaign has the potential to reach beyond the insurance industry. Whether it's
through litigation or legislation, the business community worries that employers
will end up as targets of lawsuits because of their role in choosing the health
plans they offer employees.
"Absolutely, they'll get dragged into this,"
said Kate Sullivan, manager of health-care policy for the U.S. Chamber of
Commerce, the world's largest business federation.
Depending on how far
things go, some businesses could stop providing coverage.
soon-to-be-published survey of employers by the U.S. chamber found that 25
percent of 769 respondents would stop buying insurance for their workers if
faced with expanded liability.
"Employers are going to say, Fine. That's
it. We're out,' " Sullivan warned.
And while doctors might be expected
to applaud aggressive legal moves against HMOs, people in the medical community
have delivered a mixed reaction.
Stephen Katz, president of the Connecticut State Medical Society, cautioned that
HMOs that get hit with multimillion-dollar penalties will simply pass on the
cost by raising premiums. The result will be more expensive, more restricted
care, with only the lawyers benefiting, he said.
"Except to raise
premiums, it won't make one iota of difference," Katz said.
Catherine Hair, a psychiatrist with offices near Bridgeport, Conn., said other
efforts to change the tactics of HMOs have failed, and threats of massive
judgments might be the only way to force change.
Just this week, Hair
said, managed-care companies rejected her choice of depression medication for
two patients, insisting they take a drug preferred by the HMO. But the patients
had already tried the HMO's choice, and it made them sick, Hair said.
don't know any other way," she said of the planned lawsuits.
to talk with the insurance companies one-to-one, and all I got was a more
difficult time dealing with them."
GRAPHIC: PHOTO; 1)
RICHARD DREW / AP: ON A RECENT MORNING AT THE NEW YORK STOCK EXCHANGE, SHARES OF
MOST HEALTH INSURERS FELL AFTER A NEWSPAPER REPORTED THAT TRIAL LAWYERS MAY SOON
BEGIN FILING CLASS-ACTION LAWSUITS ON BEHALF OF PATIENTS. > 2) RON EDMONDS /
AP: PRESIDENT CLINTON YESTERDAY URGED HELP FOR PATIENTS AS DR. THOMAS REARDON,
PRESIDENT OF THE AMERICAN MEDICAL ASSOCIATION, LISTENED.
LOAD-DATE: October 7, 1999