(A version of this article was published in the Atlanta Constitution [March 8, 1999]).
As an attorney who has represented insurance companies (and now sometimes opposes them), I question whether Governor Barnes' "HMO liability" legislation goes far enough in stopping insurance companies from denying necessary medical care.
1. Is Barnes more "conservative" than Rep. Charlie Norwood? Strikingly, Barnes' "managed care" proposal is milder than the legislation that conservative Republican Congressman Charlie Norwood says is needed. Rep. Norwood's bill in Congress would apply to insurance companies the rule that nearly everyone else already lives by: if you intentionally or negligently injure someone, you must be accountable. In making medical decisions, doctors have long abided by this rule.
More and more, insurance companies have been making these life-and-death medical decisions and dictating to doctors what treatment will be provided. Through a bizarre loophole, however, insurers and "managed care" organizations currently are not held accountable for wrongfully refusing or delaying essential medical care. As a result, their incentive is to maximize their profits by aggressively restricting the medical care provided to patients.
Suppose your child had a life-threatening, but treatable, medical problem. If your insurer refused to authorize the treatment needed and your child deteriorated, became permanently disabled, or even died because treatment was withheld, the insurance company is not held responsible for those preventable losses.
The Barnes proposal only partially closes this loophole. It would hold the insurer liable only for "compensatory" damages--some amount intended to "compensate" for the value of the life lost or damage done.
But even Rep. Norwood believes that more is needed to deter HMOs and insurance companies that are tempted to abuse the system. He urges that "[if] a patient is injured as a result of a covered benefit being denied or delayed, they should be able to go to state court and sue for compensatory and punitive damages for medical malpractice." (Emphasis supplied).
Imagine--a conservative Republican Congressman (and dentist) recognizes that punitive damages are needed to prevent HMOs from placing profits ahead of patients' well-being. Otherwise, powerful insurance companies can continue to gamble with patients' lives, and simply pay an occasional award limited to "compensatory" damages, with no concern about any sanction that might deter them from continuing to deny essential medical care.
2. Would the Barnes legislation hurt employers and make health insurance too costly? These are the themes of the public relations campaign being waged against Barnes' proposal. Employers could not be liable, however, because the proposed bills specifically exempt them.
As for dire predictions of extra costs, what has happened in Texas since 1997, when it became the first state to pass an "HMO liability" law? Although Texas influenced Barnes' proposal, Texas' law goes further and, like Rep. Norwood's bill, includes the possibility of punitive damages.
Doctors in Texas now report that insurers are more willing to follow the doctors' treatment plans. The dramatic "cost" increases predicted have not occurred, according to Texas' Department of Insurance. Costs did not rise even 1 percent.
Despite predictions of an "explosion" of litigation, little has resulted. The Texas Insurance Department expected as many as 4,400 appeals of HMO decisions in the first year; only 218 occurred. Significantly, when independent reviewers heard those appeals, they reportedly found that half involved erroneous decisions by HMOs. Moreover, Texas reports that only two lawsuits have been filed to enforce the law.
Doesn't Texas' experience suggest that it may have restored to doctors much needed authority in prescribing medical care, without the extra costs or litigation predicted?
3. What are the true "costs" of the current system? The media campaign of the insurance companies does not address the true "costs" of the present system--especially the avoidable costs that the Barnes plan would reduce.
First, "managed care" has multiplied the administrative burdens on doctors and other providers. Doctors' staffs now must spend hour upon hour not providing medical care, but filling out forms and submitting (and re-submitting) papers to insurers simply to be paid. Doctors complain that their ability to deliver quality care has suffered as a result.
For patients, the current system burdens them with additional costs as well. When we buy health insurance, we pay premiums so that our families' necessary medical expenses will be covered. We thus seek to avoid the potentially catastrophic financial burden that a significant illness or injury might bring.
When an insurer wrongfully denies or delays essential treatment, it may escape paying for necessary care. If the patient is fortunate, he purchases the needed care himself and is not physically harmed by the insurer's decision, although the patient has to absorb the extra expense.
Most disturbing, wrongful denials and delays in providing necessary care injure and kill patients who would have been cured with proper treatment--a horrendous personal and financial cost to these patients, their families, and the public at large. When the insurer refuses to provide needed care, the patient who remains "undertreated" may get worse and develop far more serious problems. These aggravated problems may cause a lengthy disability from work and significant additional medical expenses. The patient may even die because of the denial of care. Public assistance may be required to pay for those preventable, additional medical expenses and to replace the lost earnings.
The insurers don't discuss who now pays for these avoidable costs of their wrongful denials of care. The Barnes proposal would impose some of these costs on insurers as the parties responsible for them, and thus it gives insurers incentives to reduce these costs.
4. Why should insurers be allowed to conceal their financial arrangements with providers? Some of the loudest squawking may be that Barnes' proposal would allow a patient to find out the financial deals that HMOs and insurers have made with the patient's health care providers.
Many patients would be shocked to learn, for example, that their doctor is one of many who receive financial incentives for not referring patients to specialists, regardless whether a specialist is needed. If your mother is having chest pains but her primary care physician doesn't recommend a cardiologist, you should have a right to know whether the doctor will be paid extra for saving the HMO that expense.
What's wrong with full disclosure--a "medicine in the sunshine" rule? Is it that revealing suspicious arrangements would cause some insurers to lose business?
Disclosure of these financial deals serves at least two important interests.
First, disclosure is consistent with federal and state efforts to eliminate fraud and abuse in health care. Paying secret financial incentives to providers can be criminal fraud (as Caremark showed in pleading guilty in 1995). On the other hand, disclosure of financial incentives reduces the risk of fraudulent practices.
As health care fraud statutes reflect, secret deals can create improper incentives in making medical decisions. When those incentives reward providers for withholding needed care, costly and inappropriate decisions result.
Second, markets work more efficiently when more information is available. Withholding information about how their insurers and doctors make medical decisions denies patients necessary information about which insurers and doctors will best serve their needs.
In addition, allowing patients to know these arrangements should stimulate competition among HMOs and insurers, and thus will improve the quality of both health insurance and medical care.
We encourage people to purchase health insurance, in part, so that a catastrophe does not make them wards of the state, with their medical care paid at society's expense. With better information and better competition, consumers would be less likely to encounter denials of needed care that could bankrupt them and require public assistance.
All in all, the Barnes proposal is a cautious step in the right direction. It shrinks, but does not eliminate, the irrational loophole that encourages insurers to pursue profits over appropriate patient care.