Although the work of a managed-care task force in California is almost done, its progress has done little to defuse the hyper-politicized issue of how the state should regulate managed-care plans.
After nine months of study and public hearings, the 30-member task force drafted its final report last month and is set to make its formal recommendations on managed-care regulation to Gov. Pete Wilson this month (Dec. 22-29, 1997, p. 21).
The governor has refused to act on dozens of managed-care bills while waiting for the group's proposals because he said he didn't want to issue reactive, piecemeal legislation.
California's experience could be discouraging for other states thinking about establishing their own task forces to provide guidance on the expected torrent of managed-care legislation.
Even before the ink was dry on the task force's report, competing interests were decrying its inadequacies. That's a familiar scenario in a state that has had two healthcare czars in as many years and where the latest HMO regulator-Keith Bishop-resigned in frustration four months after being confirmed by the state Senate. Bishop was head of the state Department of Corporations, which also regulates securities.
The task force makes about 100 recommendations in its report, a draft version of which was obtained by MODERN HEALTHCARE.
Among them, the task force proposes two alternatives for moving oversight of HMOs to a new state agency. In the first alternative, the new agency would be run by a five-member appointed board chaired by a healthcare expert-a structure that would be unique among states regulating managed-care plans, according to industry sources. In the second alternative, the new agency would be run by a single appointed healthcare expert.
The group also recommended a standardized process for resolution of disputes between enrollees and plans, including independent third-party reviews; expansion of consumer choice of plans; new publicly available quality-related information; risk-adjusted payments to providers; and a pilot project with medical groups to develop disclosure of their financial arrangements with plans. The disclosure information would be tested on consumers to see if they understand it, care about it and find it helpful.
Alain Enthoven, a professor at Stanford University's graduate school of business, chaired the task force. Enthoven is a member of the influential Jackson Hole Group. He developed the concept of managed competition some 20 years ago, in which consumers would be offered choices among competing health plans and would migrate to the better, less-costly plans.
In a draft of a letter to the governor and the Legislature that will accompany the task force's report, Enthoven called its work "a substantial reform program."
However, several caveats in the introduction to the report point to problems policymakers will have with the recommendations. The proposals are not prioritized, and the task force didn't analyze the cost impact of any of the recommendations.
After the group's next-to-last meeting (it will meet once more Jan. 5 to approve the final report), Mark Hiepler, an attorney and task force member, wrote a memorandum in which he called the group's work "a great waste of time for many sincere individuals who have tried to reform what Californians have repeatedly described as an unfair, secret and often lethal system."
Hiepler has built a reputation on winning large jury awards in suits against HMOs. His comments were reproduced in a press release distributed by Los Angeles-based Consumers for Quality Care, a watchdog group headed by Jamie Court, who has condemned the task force as "industry dominated" and called its recommendations "quadriplegic."
The 30-member task force is made up of 20 Wilson appointees and five each appointed by the Senate Rules committee and the Assembly speaker. As prescribed by law, membership had equal representation from health plans, employers, enrollees, providers and consumer groups. But critics say the weight of employer and health plan representatives gave the votes to the industry.
Hiepler and Court have blasted the panel's failure to recommend removing the ERISA shield against suing HMOs in state court. The federal Employee Retirement Income Security Act of 1974 exempts employer-sponsored plans from state mandates and shields them from suits in state courts.
Beth Capell, a lobbyist for San Francisco-based Health Access California, says the group didn't address important bills that the governor vetoed, including those covering medical director liability, termination of providers without cause and coverage for certain conditions such as autologous bone-marrow transplant.
But consumer advocate Peter Lee, director of the Center for Health Care Rights in Los Angeles and a task force member, says, "On the whole, the recommendations make very positive steps for consumers." The task force's "strongest recommendations are in the area of ensuring that consumers and purchasers have better choice and information" and the requirement that plans have an independent third-party review process for denials, he says.
Myra Snyder, executive director of the California Association of Health Plans, says it will be in HMOs' best interest to implement what they can of the group's recommendations after careful analysis. But she fears that "if legislative people see it as a bill to accompany every recommendation, the task force could adversely affect the healthcare delivery system. It could paralyze us."
State and federal lawmakers aren't expected to slow their scramble to introduce managed-care regulation.
In a Dec. 8 letter to federal Rep. Brian Bilbray (R-Calif.), Michael J. Schroeder, chairman of the California Republican Party, wrote: "The degree of anger towards HMOs that I am seeing in . . . surveys I have looked at is broad and deep. Every punitive measure we have tested against HMOs (in surveys) were at least 80% positive.
"You may want to consider looking for Republican opportunities to be on the right side of this issue" via legislation, Schroeder wrote.
Enthoven says he believes Americans have to reconcile their desire for affordable healthcare with their unlimited demand for services. But with that reservation, he says he believes the task force's work will be an important contribution.
"It's pretty remarkable we got this much done, since we worked against a terribly tight deadline," Enthoven says.
The law creating the task force called for a report to be on the governor's desk in January (See chronology, p. 48). It's expected to meet its deadline.
The task force included two alternatives for the new agency regulating HMOs because proponents were about evenly split and realized they risked being voted down, says Ruth Given, an economist formerly on staff with the California Medical Association.
Consumer representatives and the CMA favored the board structure and HMOs favored the single appointed regulator.
Snyder of the California Association of Health Plans observes that if the task force were indeed industry dominated, the HMOs would have won the single regulator.