HMO Battleground: Patients' Right to Sue

In the churning debate over reform of managed health care, one controversy keeps rising to the surface: Should patients be able to sue their health-maintenance organization if it wrongly denies them treatment?

Democrats say yes. Most Republicans say no. The question could be the thorniest of the many that separate the parties as they consider managed-care reform.

Other issues this year - such as tobacco legislation - have produced a similar partisan divide. Democrats tend to side with their trial-lawyer contributors, while Republicans generally defend their business allies.

But this controversy goes deeper. It poses the question of how HMOs and preferred-provider organizations (PPOs) can be held accountable for mistakes without destroying managed care, thus making health-care insurance less affordable for millions of Americans. Under current law, plans covering 125 million Americans are protected against high-damage awards in lawsuits brought by patients who say they've been harmed by a denial to pay for treatment.

Democrats, backed by President Clinton, the American Medical Association, and the AFL-CIO, insist that people must have the right to sue. They have waged a war by anecdote, parading patients before the cameras to tell their stories of treatment delayed or denied. "Can't we ... hold health-maintenance organizations as accountable as doctors and nurses and hospitals?" asks Senate minority leader Tom Daschle (D) of South Dakota. "Why is it we only give immunity to diplomats and HMOs?"

Consumer groups say allowing patients to sue is the only way to force managed-care organizations to clean up their act. But business groups and managed-care officials say that cure would be worse than the illness.

"We absolutely oppose the Democratic bill.... We think [it] is a horrendous bill that will have the effect of pricing millions out of coverage," says Neil Trautwein, health-care lobbyist for the US Chamber of Commerce. If the liability provision were enacted, "we would have no choice but to encourage our members to drop their health coverage," he says. "You won't have small businesses stay in the system and expose their livelihood to potentially catastrophic liability."

Susan Pisano of the American Association of Health Plans, a managed-care industry group, says allowing patients to sue health plans "would destroy managed care and take us back to the failed fee-for-service system."

"Our view is that the current malpractice system is broken and that it makes no sense to broadly extend [it]," Ms. Pisano says.

A CONGRESSIONAL Budget Office study released Thursday says the Democrats' proposal would raise insurance premiums about 4 percent, or about $2 per month for an average worker. Employers would pay $4.50 more per month per employee. Opponents of that plan dispute the findings.

Republicans prefer an independent appeals process that would let patients get a third-party review of their treatment request. They would allow managed-care plans to contract with private firms to hear the appeals. Democrats want states to oversee the appeals and say the right to sue is essential to the process.

As of now, three competing proposals are on the table. All would ensure a right to appeal denials of coverage, coverage for emergency-room care, and a ban on "gag rules" prohibiting plan doctors from discussing treatment options with patients. The Senate GOP plan, however, would cover only the 48 million Americans in employer-sponsored plans not subject to state laws.

Republicans are split over the best approach, but they're eager to pass reform legislation to prevent Democrats from using the issue against them in the fall elections.