REGULATION: California Poised To Lead Nation In Managed Care Reform

      Managed care companies are bracing themselves for "an avalanche" of "major new legislation to be passed in California in coming months that could have national repercussions," the Wall Street Journal reports. "More than 100 measures are expected," many inspired by the recommendations of Gov. Pete Wilson's managed care task force, which completed work in December. Among the most pressing issues to be addressed by new laws are which state agency should be responsible for oversight of HMOs, dispute resolution processes for patients with complaints regarding medical treatment under HMOs, and information about "what is and isn't covered by the various health plans." Few will be untouched by the issues: "HMOs were invented in California and now cover more than 18 million Californians, or roughly 60% of the state's residents."

New Laws
      Dispute resolution will likely top the list of new reforms, according to industry experts. While Wilson's task force recommended an "unbiased" dispute review process, the debate has not yet focused on a specific bill. HMOs "are looking for some dollar thresholds so that they 'aren't expected to spend $500 on dispute resolution for a test that costs $50,'" said Myra Snyder, president of the California Association of Health Plans. Another bill, one that requires HMOs to release their drug formulary lists to consumers, has gained bipartisan support and "is poised for quick approval." Consumer activist Stephanie Yoder, of Citizens for the Right to Know, who last year asked 48 HMOs for their formularies and found nearly a quarter wouldn't release them "even to their own members," said, "People get more information on the side of a box of cheese than they do about a health plan." The formulary disclosure bill, sponsored by state Sen. Herschel Rosenthal (D-San Fernando Valley), would also require health plans to respond quickly to "physicians' requests for 'nonformulary drugs' that are medically needed."

Who's In Charge?
      The debate over which governing board should regulate HMOs may be more contentious. The current overseer, the California Department of Corporations, "is widely considered unfit for the job and will probably be stripped of its HMO-oversight duties." Gov. Wilson "advocates the establishment of a department whose sole focus is managed care." The new agency would hold enhanced authority "to oversee HMOs as well as the powerful medical groups that contract with HMOs and make treatment decisions, big and small."

Magnifying Glass
      Given the current focus on the "backlash against managed care," regulations passed in California this year will be scrutinized nationwide, and may "become a model for other states, and even the federal government," the Wall Street Journal reports. Of key importance in Washington as well as in California, for example, is third-party review of medical claims. Since 1989, Medicare claims have been able to undergo third-party review through a private organization called the Center for Health Dispute Resolution in Pittsford, NY. Several proposals under consideration in California "would adopt this approach for non-Medicare claims." Alternatively, a new state law that took effect in January "gives regulators power to organize panels of medical experts to resolve disputes over experimental treatments for people with life-threatening illnesses." These panels will start reviewing cases this summer, the Wall Street Journal reports. What seems clear this election year is that growing public mistrust of HMOs leaves many "state Republican leaders ... convinced that managed care is an issue they can't afford to ignore" (Rundle, 2/20).