ERISA Reform Benefits Lawyers, Not Patients
Congress appears poised to come to the rescue of patients and physicians suffering from the excesses of managed care. HMOs, critics charge, intrude into the physician-patient relationship, making care decisions in the interests of shareholders instead of patients. The proposed solution—more lawsuits—will make the problem worse, and add billions to the cost of health care.
Managed care companies have prospered by delivering to employers what they promised—health insurance with competitive premiums, accomplished by controlling costs. Some cost control measures, however, have proven extremely unpopular with health plan members and physicians alike. Typical conflicts involve utilization review, whereby a health plan refuses to pay for treatment recommended by a physician. The charge is that managed care companies, by following economic policies which affect patient care, are practicing medicine and should be subject to medical malpractice lawsuits. Currently, the Employee Retirement and Income Security Act (ERISA) severely limits such actions, but that could change if Congress adopts one of several proposals now being considered.
The Association of Trial Lawyers of America and many physician groups are urging Congress to extend malpractice liability to HMOs and employers. Physicians, frustrated by interference in care decisions, have latched onto the ERISA issue as a way to strike back at managed care organizations. Physicians should know better than anyone the negative consequences of increasing the number of malpractice lawsuits by expanding liability. As a physician, I am baffled by my colleagues’ support for this scheme.
On the other hand, I can understand why personal injury lawyers want Congress to declare “open season” on the corporate assets of managed care companies, which represent much deeper pockets than the average physician or hospital. Deeper pockets mean bigger jury awards, which for contingency-fee lawyers translates to “jackpot.”
Something is lost in that translation. Medical malpractice suits have not improved the standard of care by physicians; on the contrary, they force doctors to practice defensive medicine, and take money out of the system for the few plaintiffs who hit the jackpot. In the same way, suing managed care organizations will not translate to improved medical care from those organizations. To suggest that more lawsuits will solve the problem ignores an inevitable consequence of expanded liability.
If HMOs are subject to lawsuits, the result will be more interference, not less. Managed care companies held liable for care decisions will naturally feel obligated to control them even more tightly. The physician as patient advocate and fiduciary will disappear; instead we will see the physician as technician, carrying out commands from plan administrators acting on the advice of counsel. The needs of the patient and the physician’s judgment will be secondary to the corporation’s fear of a lawsuit.
If HMOs are sued for malpractice, they will naturally attempt to shift liability for patient injuries onto physicians and hospitals, obliterating any possibility for a coordinated defense, and increasing the cost of defending a malpractice suit several-fold. An HMO sued without codefendants would likewise enter cross-complaints against physicians and hospitals involved in the case, increasing the number and cost of lawsuits in an already-overburdened legal system. More lawsuits will lead to higher liability insurance premiums for physicians, leaving less money available for patient care, and fewer physicians practicing high-risk specialties such as obstetrics or surgery.
If managed care organizations are forced to pay huge jury awards, and pay premiums for huge insurance policies, the result will be more cost-cutting, more limits on per-patient compensation, and fewer covered benefits, as companies pass their losses on to physicians, employers, and patients.
Exposing HMOs to unlimited liability will attract a similarly unlimited number of meritless lawsuits. The prospect of fabulously deep pockets with no limit on damages will be irresistible for plaintiff’s attorneys. None of the proposals currently circulating in Congress would apply reasonable limits to HMO liability, such as the cap on noneconomic damages and limits on lawyer contingency fees found in California’s Medical Injury Compensation Act (MICRA). The resulting flood of litigation would eat up billions of dollars in legal fees, higher liability premiums, and higher health care premiums—all without addressing the original problem: intrusion by HMOs into the physician-patient relationship.
Conflicts between physicians seeking to provide high-quality care and health plans working to control costs have reached the stage where action is necessary to protect patients. The federal government is in a position to establish regulatory boundaries for managed care organizations, and to enforce them vigorously. Once appropriate regulations are in place, managed care companies should be disciplined for overstepping these boundaries. Current law, it should be noted, already permits suits for breach of contract if legal recourse proves necessary. Adding malpractice suits would be counterproductive.
The quality of medical services in the United States must be assured. That assurance should come not from lawyers or managed care administrators but from physicians. The public interest would be better served by a solution that puts the interests of patients above those of personal injury lawyers.