Our American society is in the midst of tremendous change as it tries to deal with managed care, patient rights, legal and medical reform. Two areas are in the spotlight: MICRA and HMOs.

MEDICAL INJURY COMPENSATION REFORM ACT
MICRA is an acronym for the Medical Injury Compensation Reform Act, which was enacted in 1975 as a result of claims by health care providers and insurance companies that runaway malpractice lawsuits were creating an insurance crisis and causing malpractice premiums to skyrocket, and that if something wasn't done, doctors could no longer afford to practice medicine. However, despite MICRA, the overall cost of medical care and the overall cost of malpractice insurance has actually increased faster in this state than in state where there are no limitations on damages.⁽¹⁾ An April 1995 study by the Proposition 103 Enforcement Project concluded that insurance companies, doctors and hospitals have pocketed any limited "savings" in malpractice premiums rather than pass them on to consumers in the form of lower health care costs as had been promised.

MICRA imposes a $250,000 cap on the liability of health care providers for non-economic damages (emotional distress damages) in any action for professional negligence. That cap has remained unchanged since 1975. According to economist Bob Wallace, CPA, of Brodshatzer, Wallace, Spoon & Yip, the current purchasing power of that 1975 cap of $250,000 is $83,800. You would have to increase the cap to $745,000 to adjust for inflation and bring its purchasing power up to 1998 dollars.

Not surprising, of the top 30 lobbying spenders for the first half of 1997 (from an Associated Press database of federal disclosure reports for that period), the American Medical association was at the very top, spending $8,560,000. The AMA was followed by the Chamber of Commerce of the United States at $7,000,000 and the tobacco industry, Philip Morris, at $5,900,000.

Also consider this: This country has 40-plus "physician-owned" malpractice insurance carriers, which take in more than half the total traditional medical malpractice insurance premiums in the country (around $2.5 billion a year). California's physician-owned carriers are considered among the most financially healthy and profitable of their kind in the country.⁽²⁾ So my question to you is, What happened to the medical malpractice insurance crisis?

HEALTH MAINTENANCE ORGANIZATIONS
In December 1990, a mother named Rhonda Bast was diagnosed with breast cancer and underwent a mastectomy in January 1991. In August 1991, she was diagnosed with a secondary malignancy in her left lung. Her doctor recommended she undergo an ABMT, autologous bone marrow transplant, procedure. After several requests, on December 13, 1991, her health insurance carrier, Prudential, denied coverage for the procedure stating it was "investigational and/or experimental in nature." An attorney on behalf of the Basts sent letters to Prudential on February 13 and 14, 1992, stating that Rhonda Bast needed the bone marrow transplant or would most likely die. In March of 1992, Prudential finally authorized the procedure, but it was too late. The cancer had metastasized to her brain and she died in January 1993.

The Bast estate brought an action against Prudential arguing that Prudential acted in bad faith and breached its fiduciary duty to Rhonda Bast by delaying authorization for a potentially life-saving medical procedure. The court ruled, "Although this case presents a tragic set of facts, the district court properly concluded that under the existing law the Basts are left without remedy." [Emphasis added.] Bast v. Prudential Insurance Company, 150 F.3d 1003 (9th Cir. 1998). The justices' conclusion holds a plea: "The Basts' state law claims are preempted by ERISA, and ERISA provides no remedy. Unfortunately, without action by Congress, there is nothing we can do to help the Basts and others who may find themselves in this same unfortunate situation." [Emphasis added.] Bast, Id, at 1006.

An unintended loophole in the federal Employee Retirement Income Security Act (ERISA) shields health maintenance organizations (HMOS) from legal liability for delaying or denying medically sppropriate treatment for patients who receive their health care through their employers. ERISA is a 1974 federal law intended to protect working Americans from fraud and mismanagement in their benefit plans. It was designed to govern private sector employer-employee benefit disputes. In the 25 years since ERISA was passed, traditional health care, where the doctor decided the patient's care, has given way to managed care, where insurers limit care and govern doctors' treatment decisions. ERISA has not been reformed to respond to these changes in the health insurance industry, and now the law threatens rather than protects employees' health care. While a clause in ERISA allows states to regulate the "business" of insurance, managed care companies that administer benefits for ERISA plans are not considered to be in the "business" of insurance. Because of this distinction, HMOs are freed from accountability to other specific state consumer protection laws.

Studies show HMO patients are receiving worse care than those not in an HMO:

• HMO patients are 59% more likely to have problems getting treatment.⁽³⁾


• 93% of HMO patients over 65 are more likely to have worse outcomes.⁽⁴⁾


• 55% of Americans fear that their HMO would be more interested in saving money than in providing the best medical care.⁽⁵⁾


• 48% of all Americans report that they or someone they know have experienced problems with their HMO, including difficulty getting permission to see a specialist.⁽⁶⁾

How can the ERISA loophole be closed? Congress can close the loophole. Congress has the power to end ERISA's preemption of state consumer protection laws. Bills with bipartisan support have been introduced. Patient Access to Responsible Care Act (PARCA) (H.R. 1415) would end ERISA's preemption of state remedies for personal injury and wrongful death against agents and employees of an ERISA plan. The Employee Health Insurance Accountability Act (S.1136) contains stronger ERISA reforms than PARCA, by preventing ERISA from invalidating, impairing, or superseding any cause of action under state law. Other similar omnibus managed care bills are expected to be introduced with similar ERISA reforms.

States can also pass legislation that skirts ERISA. Texas recently became the first state in the nation to offer its citizens a way around ERISA, to protect themselves against poor quality medical care. On September 18, 1998, Federal Judge Vanessa D. Gilmore upheld an unprecedented Texas law that allows patients to sue their health plans for malpractice. California Assemblyman Martin Gallegos (D-Baldwin Park) said he plans to introduce a similar law when the Legislature reconvenes in December. The Texas law, called the Health Care Liability Act, held that HMOs could be liable for such damages caused by their "failure to exercise ordinary care when making a health care treatment decision." This ruling could bolster efforts to pass similar legislation in California.

There are bills that have been proposed in the California legislature that would allow patients/consumers to sue HMOs directly for decisions preventing patients from having access to specialized tests, surgery and hospital admissions. Contact Governor Davis, your assemblyman or assemblywoman, your state senator about your support of these types of proposed legislation. [See the Consumer link for information on how to contact your legislators.]

---

(1)Study by Proposition 103 Enforcement Project, April 1995.

(2)"What's in the cards for the medical malpractice insurance industry?" Gregory Abrams, J.D., California Physician, September 1996.

(3) "Sick People In Managed Care Have Difficulty Getting Services and Treatment," Robert Wood Johnson Foundation, June 28, 1995.

(4) Dr. John E. Ware, Journal of the American Medical Association, October 1, 1996; Robert Pear, "Elderly and Poor Do Worse Under HMO Plans' Care," New York Times, October 2, 1996.

(5) Kaiser Family Foundation Survey, cited in Alissa Rubin's "Democrats to Push Patients' Rights," Los Angeles Times, January 14, 1998, A10.

(6) Kaiser Family Foundation/Harvard National Survey of Americans' Views on Consumer Protection in Managed Care, January 21, 1998.