A delicate balance on health care

Ruling: The Supreme Court artfully addresses the needs of patients and their HMOs.

June 18, 2000|By Russell Korobkin

IT IS HARD TO PLEASE Americans when it comes to health care. We want our insurance premiums to be low. At the same time, when we become ill, we want the full force of medical technology at our beck and call. In a case decided Monday, the U.S. Supreme Court guided a careful and reasonable path between these often contradictory desires. The court's opinion struck down an attack on cost control efforts of health maintenance organizations, but the decision was not a complete defeat for consumers concerned with the quality of health care.

At issue in the case, Pegram vs. Herdrich, was whether an Illinois HMO violated federal law by providing financial incentives for its physicians to provide less care to their patients. Cynthia Herdrich's doctor decided that Herdrich could wait eight days for a test in order that the test could be provided more cheaply by the HMO. As all parties agreed, this turned out to be a mistake that nearly cost Herdrich her life. But Herdrich's lawsuit did not legally depend on the quality of her doctor's decision. She claimed that the HMO violated the law solely by paying her doctor a year-end bonus that is dependent in part on the resources the doctor uses during the year.

As the Supreme Court realized, allowing Herdrich's claim to go forward would virtually outlaw all efforts to control health care costs in a meaningful way.

The court's rejection of Herdrich's claim was unanimous and widely expected, but the opinion was not a complete victory for HMOs. In what seems almost an afterthought, the court resolved an important and uncertain point of law in favor of health care consumers.

Under federal law, if a HMO that provides health care through an employer-sponsored benefit plan refuses to pay for a treatment because it erroneously claims that treatment is not covered under the plan, the patient's legal remedies are severely limited. In contrast, there is no federal bar to a patient suing a HMO for malpractice, although some states prohibit such suits. The problem is that it is often impossible to tell the two situations apart.

Most HMOs limit coverage to "medically necessary" treatments. This means that if the HMO doctor decides a treatment is not medically necessary, the HMO can deny coverage on the ground that the treatment is not covered under the health plan.

If the doctor's determination concerning medical necessity is incorrect, can the patient sue for malpractice, or is the patient limited to the much stingier remedies available for wrong-coverage determinations?

The courts have struggled mightily with this question, often issuing conflicting rulings. On Monday, however, the Supreme Court resolved the question in favor of consumers by noting that Herdrich could in fact bring a malpractice claim against her HMO for denying her immediate access to the necessary test because of a faulty medical opinion.

The full force of the Supreme Court's ruling is to give HMOs financial incentives to balance cost and quality. This is a tenuous balance, to be sure. But given Americans' conflicting desires about health care, it is the most appropriate path the court could take.

Russell Korobkin is a professor of law at UCLA, where he specializes in health care law, contracts and nego tiation. He wrote this article for the Los Angeles Times.

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