How to kill HMO reform

The lawyers who brought down Big Tobacco have now set their sights on HMOs, but what's wrong with this picture?

By David McGuire

Published November 30, 1999 1:00PM (EST)

Leave it to the lawyers to muck up a perfectly good "right-to-sue" law.

The last thing that congressional defenders of the Patients' Bill of Rights wanted to hear, as they battled their way to a decisive victory in the House of Representatives earlier this year, was that the same pinstriped gang that successfully sued Big Tobacco was gearing up to mount an offensive against the managed-care industry.

Some proponents of the managed-care reform bill now fear that the highly publicized legal attack could derail the legislation on its way to the president.

"It doesn't make a lot of the proponents of the bill very happy to see these people running after lawsuits," says Dennis Fitzgibbons, a Democratic staffer on the House Commerce Committee, who has been an active supporter of the legislation. "The timing could have been better."

In October, the House voted 275-151 to pass the Norwood-Dingell Patients' Bill of Rights legislation, a sweeping reform package that, among other things, gives HMO members the right to sue managed-care plans that deny them access to care.

The passage was a landmark victory for House Democrats, who -- with the aid of massive public outcry over managed-care abuses -- got a lot of Republicans to support the legislation.

The strongest argument against the Norwood-Dingell package -- that it would create a whole new universe of costly legal warfare that would ultimately benefit nobody but the nation's trial lawyers -- was vehemently refuted by bill supporters, and ultimately failed to persuade moderate Democrats and Republicans to turn against the legislation.

But since then, as details of a coordinated attack against the managed-care industry by some of the nation's top attorneys have emerged, key legislators now appear to be reconsidering the liability provisions contained in the bill.

While that legal offensive is being mounted under existing law, and has little if anything to do with the Norwood-Dingell bill, it has provided opponents of the legislation with a valuable rhetorical tool to use in the ongoing debate.

"The trial lawyers' activity is beginning to make [the] individuals that voted for Norwood-Dingell think again," contends Karen Ignagni, president of the American Association of Health Plans (AAHP). "I see a palpable shift in individuals' thinking." As the HMO industry's foremost trade and lobbying group, AAHP has been an active participant in the managed-care debate.

Moderate House Democrat Cal Dooley agrees with Ignagni's assessment.

"To see what is a very aggressive and coordinated attack by trial lawyers on the [managed care] industry as a whole, you can't be under any illusions that this is not going to cost the health-care system money," says Dooley, D-Calif., who voted in favor of the Norwood-Dingell bill.

Dooley and Ignagni are referring to the revelation, first reported by the Wall Street Journal in late September, that the cadre of attorneys who mounted successful multi-million-dollar class-action cases against the tobacco industry have now turned their eyes toward the managed-care industry.

Class-action suits aren't even allowed under Norwood-Dingell, but the trial lawyer activity belies, to some extent, the argument of the bill's supporters that existing law does not allow patients to sue their managed-care plans. Managed-care companies are protected from a great deal of litigation by the Employment Retirement Income Security Act of 1974 (ERISA), which Norwood-Dingell would amend.

Dooley, who represents a low-income agricultural district in Southern California, says that much-needed managed-care reforms should not come at the expense of reduced access to health insurance. "I don't have people in my district complaining about managed care [abuses], I have people complaining about having no health care whatsoever. They would be absolutely thrilled to be in a managed-care plan," Dooley says. "I struggle with accepting that dollars that are going to be spent on lawyers fees and defending class-action suits are really going to be providing" better care to patients.

For the bill's supporters, the revelations about mounting trial lawyer activity couldn't come at a worse time.

When Congress reconvenes after the holidays, the House bill will have to go to conference with Senate legislation that includes far fewer patient protections and does not allow HMO members the right to sue their health plans.

Senate Republican leaders -- who hold great sway over the conference process -- have adamantly opposed liability provisions and are almost certain to raise the specter of trial lawyer activity in upcoming managed-care debates.

Trial attorney David Senoff agrees that the timing of the tobacco attorneys' class-action efforts could end up hurting the House bill's chances of passage. "Ultimately the lawsuits will impact on the decision," Senoff says. "Republicans are gloating. All of the things they have been trumpeting ... are coming true."

But Senoff, who specializes in suing on behalf of managed-care patients who feel they have been wronged by health plans, says that it would be a "miscarriage of justice" if the current legal activity were to derail the managed-care legislation -- particularly since the cases in question are being pursued under existing law.

Fitzgibbons agrees. "The [Norwood-Dingell] legislation itself does not enable class-action suits; in fact it specifically would [prohibit] all of the [types of cases now being pursued] under existing [law]," he says. Under the Norwood-Dingell bill, a managed-care patient would be required to go through an out-of-court third-party review process before filing any lawsuits.

Still, such fine distinctions will probably be lost in the bombast that will doubtless surround the managed-care debate in the coming congressional session, observers say.

"The politics next year are going to be even more prominent than they were this year," says a highly placed Senate leadership source who asked that his name not be used. As the managed-care debate becomes fodder for pointed campaign speeches, the chances that the combatants in the debate will come to an amicable compromise will dwindle markedly, the source says.

Democrats who want to use the legislation as an issue in their campaigns will be in no hurry to push the bill through conference, and Republicans who oppose the legislation certainly won't be in a rush to craft compromise managed-care legislation, observers say.

Compounding the problems facing the House managed-care legislation is the fact that the conference committee, which must reconcile the Senate and House bills, is "pretty heavily stacked" against a compromise, Fitzgibbons says.

The House leadership pointedly excluded Rep. Charlie Norwood, R-Ga., from the conference committee. A doctor and adamant supporter of managed-care reform, Norwood helped draft the House legislation and was largely credited with building the massive bipartisan support that the bill enjoyed.

The Senate source, who opposes the House bill, agrees with Fitzgibbons' assessment. "You couldn't get a more diametrically opposed group of conferees," he says.

Given the increasingly acrimonious dissension between the two camps -- aided in no small part by mounting concerns about managed-care litigation -- the possibility that the managed-care legislation will die on the vine is a "very likely scenario," Dooley says, adding that he doesn't think the debate will be resolved next year.

David McGuire

David McGuire is a reporter in Washington.

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