MAY 29, 2000
Horrors of California's HMOs
© 2000

California often leads the nation (for good and ill) in a variety of areas: fashion, fads, colloquial rape of the language, and bad legislative practice. However, every once in a while (rather like a broken clock that is right twice a day), a gem is found in the flotsam.

The California Medical Association has filed the first, but not only or last, lawsuit that accuses three of the state's largest HMOs of running what amounts to an illegal racket. HOOAH!

Whenever I bring up the issue of HMOs on my talk show the phones immediately go ballistic. This recent lawsuit that was filed in federal court in Baghdad by the Bay charges Blue Cross, Pacificare and HealthNet with violating the Racketeer Influence and Corrupt Organizations Act, a.k.a. RICO.

Once upon a time it would have difficult to marshal sympathy for affluent doctors perceived as wealthy, luxury car driving, Wednesday golfing elitists. However, in the wake of Everyman's experiences with the daily penultimate evils of bureaucracy run amok, the doctors have found a huge cheerleading section.

This lawsuit states the three HMOs, which cover nearly two out of every three insured Californians had promised patients full health care coverage. However, they subsequently failed to provide sufficient money to pay doctors to provide that care, and the California Medical Association says that is "organized fraud."

CMA is the largest doctors' group in California and although some southern law firms started suing HMOs last year in other states for similar RICO act claims, some observers claim this is the first time doctors have used racketeering laws to try to force HMOs to pay physicians more money.

As our on-air discussions of the evils of HMO hubris picked up steam I heard from several doctors, nurses, and medical employees as well as a smaller sampling of insurance types and more p.o.-ed patients than time or space permits.

The nexus of the problem is a mechanism I have been complaining about for years. It is called "Capitation." Capitation is the method by which HMOs pay doctors' groups a fixed amount of money (regardless of the health or needs of members) each month based on the number of patients enrolled in that group. The doctors are to use that money to pay for patient care and tests.

It has always seemed that this method, as opposed to the old "fee-for-services" method, created an incentive for doctors not to do certain procedures or order certain tests. The less "medicine" provided patients results in more profit for the group.

Virtually every doctor I have spoken to for over ten years always claims, "We would never base medical decisions on financial reward." I always found that hard to believe. During my recent on-air discussion of this issue I repeated this claim to every doctor who called. "Are doctors lying to me when they say that?" I would ask. "Yes. Absolutely," responded over a half dozen callers.

Halfway through the discussion an unsolicited call came in from Dr. Jack Lewin who is the Chief Executive Officer of the California Medical Association and we talked for about half-hour. Apparently the essence of this complaint is a legislative duplicity I frankly can't understand.

Basically the CMA is attempting to change state and federal laws in order to allow doctors to band together to bargain as a group with the HMOs. Currently the doctors can't do that. Since they are considered small businesses they are prohibited by certain antitrust laws from banding together to set prices. CMA hopes to exempt doctors from those antitrust laws. They have tried lobbying the bill mill in Sacramento but HMO lobbyists are winning the legislator manipulation game arguing doctors would become a price-fixing cartel. Hey, wait a minute -- that what the HMOs are? Oh, I get it. This is really a territorial imperative thing.

Beyond all these Rolex wearing doctors and lawyers, patient/members, real live people are getting the shaft. One desperate listener who couldn't get on the air sent me the following by both fax and email. "Can't get through. My wife has a story of substandard care and the impact it had on our family that will curl you hair. The radiologist reported negative mammograms. My wife found lumps shortly thereafter. After the surgery and chemotherapy, she obtained the mammograms and there was a lump visible. Then the horror continued and even got worse. The attorney she found was corrupt, gave back the mammograms and dropped us with three months to go to trial. Continuing with a new attorney, the judge dismissed the case in the face of the clear evidence. We ran out of money. Meantime, my wife underwent three operations, which we believe would have been avoided with the earlier detection of the lump and then better medical care.

"The doctors following HMO policies are actuarial predators. They count on:

"Then, companies go out of their way to hire the young and the healthy. And, as with me at the age of 60, they terminate those with health problems in their family. At this point I am working on contract, my wife is apparently stable, but the cancer has come back once already and she is weak and can't work. She has two teenagers to watch over too. My Cobra payments are $640/month and they run out in 5 months."

What bugs me about this mess is that the HMOs are a price-fixing cartel. The HMOs knowingly don't provide sufficient money for doctors to take care of patients. Doctors are going out of business, or fleeing the state further attriting the state's tax base. Meanwhile patients have been transformed into "members" who are having medical decisions made by twenty-something minimum wage HMO staffers reading off a list of what some bureaucrat has written.

The Hippocratic oath says, "Do no harm." If there is an HMO pledge it must be "Deny, deny, deny. Delay, delay, delay. If we get lucky they'll die before we have to pay."

Dr. Lewin tells me this California suit is not the Lone Ranger, but rather the first in a series of similar RICO civil suits against Health Maintenance Organizations. Although Jack didn't say so directly, I have the impression CMA is less interested in taking the HMOs to the cleaners, and more hopeful this litigation will compel the HMOs and perhaps the legislature to change policy and/or provide sufficient money to actually take care of patients.