An Easy Out for Managed Care

Saturday, April 4, 1998; Page A19

A year ago Madison Scott was born with correctable early-stage retinopathy. She now is blind after her parents' HMO and HMO doctors failed to authorize care when she needed it. Countless similar tragedies occur every day across the nation. HMOs must be dissuaded from wrongfully denying care.

The best way to do this is to close an unintended and undeserved loophole in the Employment Retirement Income Security Act, the 1974 federal law known as ERISA.

ERISA contains a so-called "preemption clause" requiring that federal law override state laws relating to employee pension and benefit plans. When applied to managed care health plans, the clause creates an incentive to deny care because it removes ("preempts") state law protections for patients, while federal law offers them virtually no effective remedy. This policy could not be worse. Each act of wrongful denial produces profit for the HMO while harming remediless patients. An appeals process cannot correct this defect.

Of course, HMOs and the rest of the managed health care "industry" oppose closing the loophole. Allied with the industry are their employer group customers who buy health plans "on behalf of" their employees (patients).

And to make matters worse, your editorial "Civilizing Managed Care" [March 16], which discusses "patients' rights" legislation, endorses the industry position, which is to fight any change that would permit patients to sue for damages. Industry folks say such lawsuits would increase the cost of health care. But this contention is easily exposed as invalid.

Allowing patients to sue HMOs for wrongful conduct is fundamental to the proper functioning of health care markets, the very foundation for managed care. Moreover, providing patients with access to the courts would not increase the true costs of medical care; rather it would reduce the cost by preventing the wrongful conduct in the first place.

Managed care is supposed to rely on market discipline to maintain health care quality while cutting costs. Market discipline must include legal constraints that enforce remedies for broken contracts and civil injuries. Without the sanction of having to compensate the victims of their wrongdoing, HMOs will continue to cut their expenditures by withholding deserved treatment and paying their managers bonuses for actions that drive down the quality of care. Horror stories such as Madison Scott's will continue, and managed care will never achieve its fundamental purpose -- to reduce cost without impairing the quality of care.

Faced with legal accountability, HMOs will make more responsible decisions about the authorization and delivery of care because they no longer will profit from wrongful conduct. Also, access to the courts will lessen the need for government regulation of managed care.

Your editorial says that the rule in medicine is "first do no harm" and that "it should be the rule for legislating on medicine as well." The ERISA preemption loophole is a severed artery requiring a tourniquet. Close the loophole.

-- Ronald F. Hoffman and Mark O. Hiepler

The writers are attorneys in San Diego and Oxnard, Calif, respectively.