California's managed-care plans cover more than 19 million people -- roughly half of the state's insured population. So it's not surprising there is major interest across the state in 77 lengthy policy recommendations issued by the state's Managed Health Care Improvement Task Force.
Though the task-force recommendations may sound like a bureaucratic, managed-care regulation nightmare -- and, indeed, some of the recommendations have raised concern among the state's health plans -- most are viewed as reasonable solutions to the tensions between private and public interests.
Changes in the law already are imminent in California as legislators have been quick to act on the task force's recommendations. And it's likely that other states will see the recommendations as preemptive measures to consider or adopt to have managed care "done right," says Nancy Monk, vice president of public affairs for PacifiCare Health Systems, a Cypress, Calif.-based managed care company.
"(The task force) did some important work in hashing out issues that matter to those affected by health policy," Monk says, "What we got was a clear focus on the pros and cons of the issues."
The 77 recommendations, issued in January, do not strongly advocate expanding definitions of medical malpractice or other highly controversial moves. But, according to Monk, "They do recommend more disclosure, standardized data, consumer choice and third-party dispute resolution, such as that now in place with Medicare."
On the other hand, the task force paves the way for more extensive oversight of managed health plans, says David Schmidt, vice president of McKenna & Associates Managed Care Insurance Services in Irvine, Calif. "The scrutiny is tremendous. And the responsibility of HMOs in providing information, standardizing it and taking related steps is only increasing."
The task force brought together 30 individuals with a wide range of professional experience, including officials of health plans and hospitals, doctors, nurses, consumers, business people and others. Alain Enthoven, a professor at Stanford University's graduate school of business, was chairman of the task force. A member of the influential Jackson Hole Group, Enthoven is considered the father of the concept of managed competition, an idea intended to force health plans to compete for consumer business and, thus, drive down costs.
Because the task force engaged mainly in discussion, the document it released is rather vague, Schmidt says, and likely will create a flurry of legislative activity. "This document is a springboard," he says.
While the task force was deliberating during the past two years, California Gov. Pete Wilson vetoed many of the healthcare-related bills put before him, often citing the task force's work as the reason. Now that the task force has published its recommendations, the governor has specified the type of laws he will support as well as those he intends to veto. His views generally have coincided with the views of the managed-care community.
Some items favored both by the task force and Wilson include improved, standardized communication materials regarding health-plan benefits, expanded access to specialists and direct access to obstetricians/gynecologists.
Wilson has made it clear, however, that he will initial no bill that runs the risk of raising insurance costs. The task force, citing time and resource constraints, did not estimate the cost of any of its recommendations.
One issue that was central to the task force deliberations was who should regulate health plans. It recommended moving managed-care plan regulation away from the Department of Corporations, which currently oversees it, to a new state entity. Wilson responded May 1 with an announcement that he plans to create a California Department of Managed Health Care and abolish the Department of Corporations. The reorganization will take effect July 1.
According to a May 2 article in the Los Angeles Times, Wilson said in January that he would take steps to improve the quality control, accountability and efficiency of the state's oversight of managed-care programs. The local media frequently has focused on the Department of Corporations, claiming that it is inadequate and fails to protect the state's large number of managed-care enrollees.
In a written statement released the day after his announcement, the governor said, "This reorganization plan is a fundamental first step toward ensuring that government keeps pace with the enormous changes occurring within the healthcare industry."
But Jamie Court, director of Consumers for Quality Care, labels Wilson's plan as "a slick and ineffective response" to problems in the managed-care industry.
"This is an aspirin for an open wound," he says. Court predicts the new agency will be much like the department it is replacing, one he believes has been ineffective.
Another issue the task force addressed was the requirement that managed-care regulators develop standard reference contracts for all product types in the small-group and individual market or that health plans provide upon request comparative contract information. The issue already has been translated into legislation.
In mid-April, the California assembly passed a bill signed by Wilson requiring plans to present information on benefits, services and terms in an easy-to-read format that will enable consumers to easily compare one plan with another.
The bill, sponsored by the California Academy of Family Physicians and the Citizens for the "Right to Know" coalition, is a weaker version of what the task force recommended but is expected to achieve the same results.
PacifiCare opposed the task force recommendation, saying it would stymie innovation and hurt the ability of consumers to compare health plans. "Our customers want more flexibility to design their benefits," Monk says.
And according to Schmidt, the legal soundness of such a measure is questionable.
"HMOs could take (the measure) to a federal court" if it were enacted," he says.
In related recommendations, the task force called for improved collection of state data on outcomes and measures affecting quality of medical care. The objective of the task force was, first, to work with health plans and, ultimately, to provide information at the provider level.
The intention is to see whether people are being given enough care and if the results of that care are being properly managed, Schmidt says.
The task force also grappled with the question of whether consumers should be informed about the use of capitated payments. In the end, it recommended "disclosure of scope and general methods and incentives paid to contracting provider groups; and health plan, provider group, and health practitioner disclosure of specific methods paid or received" upon request.
Because of the increased paperwork that would result from the recommendations, Wilson probably will fight them, Monk says. Opposition can be expected from HMOs as well. "We don't want to share proprietary information," Monk says. "We want information to be useful for the consumer."
Health plans now send out a three-plus-inch-thick packet of materials to members, before and after they enroll. "We don't object to disclosure, just pointless disclosure," Monk says.
In regard to dispute resolution, the task force's findings were quite specific: "The state entity for regulation of managed care should be directed to establish and implement by Jan. 1, 2000, an unbiased, expert-based, independent, third-party review process for grievances pertaining to medical necessity, appropriateness, and experimental treatments."
Legislation that was not initiated in response to the work of the task force will address some of the concerns expressed by task force members regarding dispute resolution. Senate Bill 1653, now working its way through the state legislature, would -- if approved -- provide for such external review related to denied treatments costing more than $2,000. The bill has the support of the California Association of Health Plans.
However, the task force's influence can be seen in the governor's signing of a bill in late April that requires health plans to give women direct access to their reproductive health-care providers. Additional proposed legislation requires continuity of care in certain cases and standing referrals to specialists for those with chronic or serious conditions.
The task force also discussed other legal measures that are expected to make their way onto the legislative agenda this year, experts say.
"HMOs should look at (the recommendations) as comprehensive," Schmidt says. "The scrutiny is on us, and we should continue to look at quality issues and improvement.
"If I were running an HMO, I'd look at the details and elements I could follow to re-engineer my operations. Though (the task force made) good and onerous points, it can help you make a successful product."
And it's a good time to look at how your operations are protected financially and legally, he says. "The ante is higher than ever to have excellent (insurance) contracts."
Janet R. Purdy is a Los Angeles-based writer and editor.