HMO COSTS: Doctors Group Wants Capitation Protections

      In an effort to staunch the financial losses of physician groups, the California Medical Association is sponsoring legislation to require HMOs to base capitation rates on actuarial studies and to exempt the price of drugs from capitation, American Medical News reports. The legislation comes at a time when most California medical groups and IPAs are losing money, while health plans are reporting profits. HMO premiums have fallen from $125 a month to $110, "a level that is 23% below the national average." In 1998, nine of California's top HMOs turned a profit from their in-state operations, "including Kaiser Permanente, which lost $288 million nationwide." The CMA contends it needs such legislation to protect physicians "with less negotiating clout," many of whom are forced to accept HMOs' "money-losing low rates." But opponents say the proposals "won't benefit patient care and pose substantial administrative burdens." "If you don't include drugs in the capitation rate, there is a temptation to use more drugs," says Walter Zelman, director of the California Association of Health Plans. Both bills were approved by legislative committees in mid-July, and must be approved by the full Legislature by September 10 in order to move to Gov. Gray Davis' desk (Page, 8/9).