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California Referenda Seek to Curb HMOs; Other States Watching

October 13, 1996

SAN DIEGO (AP) _ Suzanne Lobb says her husband bled to death lying in his hospital bed as his HMO doctors ignored his pleas for help.

Dwight Lobb had been admitted to a hospital in 1993 for routine surgery and never went home. Instead, he died on his 47th birthday after popping a suture and bleeding internally.

Lobb’s is one of the horror stories that proponents of ballot issues in California and Oregon are using to try and persuade voters to impose stiff new restrictions on health maintenance organizations.

``These people didn’t do their job,″ said Suzanne Lobb, who is working for Proposition 216, the more sweeping of two measures in California. ``You can’t know what it does to a family, how you suffer.″

Both of the measures would bar financial incentives for doctors to deny or delay medical care and ban so-called gag rules that can prevent doctors from criticizing HMO care. They would also require a second medical opinon before denying treatment.

They would also require hospitals and nursing homes to maintain specific minimum staffing standards.

The industry says the measures will drastically drive up the cost of health care, leading employers _ who pay the bulk of health insurance premiums _ to cut thousands of jobs.

``Despite what the proponents would have you believe, (the proposals) have nothing to do with patient protection and quality health care,″ said Janet Maira of Taxpayers Against Higher Health Costs, an industry group fighting the proposals.

``They will drive up costs without improving quality,″ Maira said. ``It will force more people to go without insurance.″

Government officials in other states, which have enacted less sweeping HMO restrictions over the past two years, are watching the results closely. They’re looking for clues to the depth of the backlash against the controls on care being imposed by HMOs in the name of cost savings.

Fueling the backlash is a belief among many HMO members that the industry puts profits before people.

Opponents of California Propositions 214 and 216 say the measures are designed to protect the income of doctors and the jobs of nurses and other hospital workers, which are increasingly being cut as health care agencies economize to meet the demands of HMOs.

The opponents say free market forces will result in any necessary reforms of HMOs as they compete for a larger share of the health care market.

``If all legislation does is impose more limits in what HMOs can do to manage costs, all it does is drive up costs,″ said Larry Leisure, a managing partner at Andersen Consulting in San Francisco, a paid consultant to the managed care industry. ``It limits the health plan’s ability to use reasonable managed care techniques.″

In California, 13 million people are enrolled in health maintenance organizations _ about 40 percent of the state _ and enrollment is increasing by more than 500,000 a year.

More than 70 percent of Americans who get health insurance through their employers belong to HMOs and other managed care networks.

The Oregon measure strikes at the essence of one of managed care’s fundamental ways of cutting costs by banning a method of paying doctors called capitation that is gaining in use. Under capitation physicians get a flat payment per month for overseeing the health care of a patient regardless of the amount of treatment. Proponents say it encourages doctors to keep patients healthy. Critics say it encourages doctors to keep services to a minimum, putting a patient’s health in jeopardy.

The Oregon measure harkens back to traditional ``fee for service″ medicine by outlining ways to pay providers for work actually performed rather than paying them for controlling services.

Opponents say such a move would return the state to the soaring medical cost inflation of the early 1980s, because, under it, doctors who treat more earn more money.

The debate in California is blurred by the two competing measures, a fact the opponents are using in their advertising to convince voters to reject both.

Proposition 216 is backed by the California Nurses Association, consumer activist Ralph Nader and his protege, Harvey Rosenfield, who successfully campaigned for a ballot issue several years ago rolling back California auto insurance premiums.

Proposition 214 is pushed mostly by labor unions including the Service Employees International Union, which represents some hospital workers, and the California Federation of Teachers.

``It would make managed care more rational,″ said Maureen Anderson of the Yes On 214 campaign. ``We’re getting rid of the unethical cost controls.″

The biggest difference between the two are the new taxes that would be imposed only under 216.

There are four of them _ on the compensation of HMO chief executives who own more than $2.5 million in company stock, on the elimination of hospital beds, on mergers and acquistions in the health care industry, and on the sale or conversion of non-profit health care businesses to commercial enterprises.

Under Proposition 216, HMOs would be prevented from raising premiums to pay for the taxes and a consumer watchdog agency would be created to monitor HMO activity.

The California measures are opposed by a coalition of health maintenance organizations and businesses which have benefited from lower HMO premiums for covering their employees.

They have hired the political consulting firm Goddard-Claussen/First Tuesday, the same company responsible for ``Harry and Louise,″ the television commercials that helped kill President Clinton’s health care reform plan in 1994.

In July, Taxpayers Against Higher Health Costs released a study by the consulting firm KPMG Peat Marwick contending health insurance premiums wouild rise as much as 14 1/2 percent, costing employers from $1.3 billion and $2.7 billion next year and causing up to 60,000 job losses.

Opponents of the measure also say that while some hospitals are nearly half empty because so much medical care is now being delivered on an outpatient basis, the measures would protect unnecessary hospital jobs.

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