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California often leads the nation (for good and ill) in a variety of
areas: fashion, fads, colloquial rape of the language, and bad
legislative practice. However, every once in a while (rather like a
broken clock that is right twice a day), a gem is found in the flotsam.

The California Medical Association has filed the first, but not only
or last, lawsuit that accuses three of the state’s largest HMOs of
running what amounts to an illegal racket. HOOAH!

Whenever I bring up the issue of HMOs on my talk show the phones
immediately go ballistic. This recent lawsuit that was filed in federal
court in Baghdad by the Bay charges Blue Cross, Pacificare and HealthNet
with violating the Racketeer Influence and Corrupt Organizations Act,
a.k.a. RICO.

Once upon a time it would have difficult to marshal sympathy for
affluent doctors perceived as wealthy, luxury car driving, Wednesday
golfing elitists. However, in the wake of Everyman’s experiences with
the daily penultimate evils of bureaucracy run amok, the doctors have
found a huge cheerleading section.

This lawsuit states the three HMOs, which cover nearly two out of
every three insured Californians had promised patients full health care
coverage. However, they subsequently failed to provide sufficient money
to pay doctors to provide that care, and the California Medical
Association says that is “organized fraud.”

CMA is the largest doctors’ group in California and although some
southern law firms started suing HMOs last year in other states for
similar RICO act claims, some observers claim this is the first time
doctors have used racketeering laws to try to force HMOs to pay
physicians more money.

As our on-air discussions of the evils of HMO hubris picked up steam I
heard from several doctors, nurses, and medical employees as well as a
smaller sampling of insurance types and more p.o.-ed patients than time
or space permits.

The nexus of the problem is a mechanism I have been complaining about
for years. It is called “Capitation.” Capitation is the method by which
HMOs pay doctors’ groups a fixed amount of money (regardless of the
health or needs of members) each month based on the number of patients
enrolled in that group. The doctors are to use that money to pay for
patient care and tests.

It has always seemed that this method, as opposed to the old
“fee-for-services” method, created an incentive for doctors not to
do certain procedures or order certain tests. The less “medicine”
provided patients results in more profit for the group.

Virtually every doctor I have spoken to for over ten years always
claims, “We would never base medical decisions on financial reward.” I
always found that hard to believe. During my recent on-air discussion of
this issue I repeated this claim to every doctor who called. “Are
doctors lying to me when they say that?” I would ask. “Yes.
Absolutely,” responded over a half dozen callers.

Halfway through the discussion an unsolicited call came in from Dr.
Jack Lewin who is the Chief Executive Officer of the California Medical
Association and we talked for about half-hour. Apparently the essence of
this complaint is a legislative duplicity I frankly can’t understand.

Basically the CMA is attempting to change state and federal laws in
order to allow doctors to band together to bargain as a group with the
HMOs. Currently the doctors can’t do that. Since they are considered
small businesses they are prohibited by certain antitrust laws from
banding together to set prices. CMA hopes to exempt doctors from those
antitrust laws. They have tried lobbying the bill mill in Sacramento but
HMO lobbyists are winning the legislator manipulation game arguing
doctors would become a price-fixing cartel. Hey, wait a minute — that
what the HMOs are? Oh, I get it. This is really a territorial
imperative thing.

Beyond all these Rolex wearing doctors and lawyers, patient/members,
real live people are getting the shaft. One desperate listener who
couldn’t get on the air sent me the following by both fax and email.
“Can’t get through. My wife has a story of substandard care and the
impact it had on our family that will curl you hair. The radiologist
reported negative mammograms. My wife found lumps shortly thereafter.
After the surgery and chemotherapy, she obtained the mammograms and there
was a lump visible. Then the horror continued and even got worse. The
attorney she found was corrupt, gave back the mammograms and dropped us
with three months to go to trial. Continuing with
a new attorney, the judge dismissed the case in the face of the clear
evidence. We ran out of money. Meantime, my wife underwent three
operations, which we believe would have been avoided with the earlier
detection of the lump and then better medical care.

“The doctors following HMO policies are actuarial predators. They
count on:

  • The patient will not notice the substandard care.

  • The patient will not be able to prove the substandard care.

  • The patient will be afraid to sue.

  • The patient will be too sick to sue.

  • The patient will die before they can sue.

  • Skillful, crooked and intense defense will intimidate and win.

  • The laws of the state will dissuade competent counsel from taking
    the suit.

  • The laws of the state will prevent the suit. It is a numbers game
    and the ill patients are the losers.

“Then, companies go out of their way to hire the young and the
healthy. And, as with me at the age of 60, they terminate those with
health problems in their family. At this point I am working on contract,
my wife is apparently stable, but the cancer has come back once already
and she is weak and can’t work. She has two teenagers to watch over too.
My Cobra payments are $640/month and they run out in 5 months.”

What bugs me about this mess is that the HMOs are a price-fixing
cartel. The HMOs knowingly don’t provide sufficient money for doctors to
take care of patients. Doctors are going out of business, or fleeing the
state further attriting the state’s tax base. Meanwhile patients have
been transformed into “members” who are having medical decisions made by
twenty-something minimum wage HMO staffers reading off a list of what
some bureaucrat has written.

The Hippocratic oath says, “Do no harm.” If there is an HMO pledge it
must be “Deny, deny, deny. Delay, delay, delay. If we get lucky they’ll
die before we have to pay.”

Dr. Lewin tells me this California suit is not the Lone Ranger, but
rather the first in a series of similar RICO civil suits against Health
Maintenance Organizations. Although Jack didn’t say so directly, I have
the impression CMA is less interested in taking the HMOs to the cleaners,
and more hopeful this litigation will compel the HMOs and perhaps the
legislature to change policy and/or provide sufficient money to actually
take care of patients.

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