State’s New HMO Burden

When the Supreme Court ruled Monday that health maintenance organizations have the right to give doctors bonuses for keeping down treatment costs, it recognized an uncomfortable truth: Cost controls are a bedrock principle of HMOs and can’t be achieved without rationing treatment.

The ruling will by no means end consumer disputes with HMOs. It does shift the burden of the conflict to the states, which, as the court observed, have traditionally handled such matters of “social policy.”

In California, HMO oversight has never been a strong point. The job is being removed from the state Department of Corporations, which was not consumer-oriented and was ill equipped to judge medical care issues. But the newly created HMO regulator, the Department of Managed Care, needs more resources to do its job. Patients will be the losers if the department can’t get up to speed quickly.

Last Sunday, a joint legislative budget committee supplemented the department’s modest $30 million in annual funding with $5 million to educate consumers about their rights and privileges under the new department. Gov. Gray Davis should promptly approve the outreach funds, and here’s why: A new survey by the Kaiser Family Foundation shows that 90% of health care consumers in California don’t even know the name of the state agency that regulates HMOs and other health plans. Small wonder. A report last year by State Auditor Kurt Sjoberg concluded that the Department of Corporations has been grossly remiss at gathering health care information and disseminating it to consumers. Among its failures: While state law required the department to review HMOs’ adherence to so-called medical best-practice standards at least every three years and make its reviews public within six months, a Consumers Union survey found that the agency conducted surveys only every five years, then waited a year to release them to the public.

The Department of Managed Care takes over the job July 1. Director Daniel Zingale has sensible plans to beef up the quality of information for consumers by, among other things, issuing HMO “report cards.” Zingale will need resources to provide really useful information, from exactly what each plan covers to what drugs it pays for and what hospitals, doctors and clinics are available. The reports should also evaluate providers’ “success rates” for common procedures like cardiovascular surgery.

The legislation that created the new department requires it to complete some mammoth tasks in the next five months. Among them are forming a physician-review panel to recommend ways to reduce medical errors and developing an independent medical review system to which patients can appeal an HMO’s denial of care. The department will also have to monitor the fiscal solvency of managed care companies, some of which are at the edge of bankruptcy.

Considering the burden that the Supreme Court just dropped on state regulators, Zingale and his staff will have little time to learn their jobs. Sufficient funding can help speed their learning, and they should get what they need.