State HMOs Will Allow Independent Appeals

Concerned that powerful regulation of their industry is at hand, California’s HMOs on Wednesday gave consumers a key safeguard, allowing those who are denied care to appeal to an independent panel of doctors for what amounts to a binding second opinion.

Once the panels are up and running, a patient who wishes to undergo a particular treatment--a CAT scan, say, or a bone-marrow transplant--but is turned down, may turn to one of these panels of experts. The HMOs and managed-care firms, all members of the California Assn. of Health Plans, have promised that if the experts agree with the patient, then the companies will provide the service.

The program, by 22 companies serving almost 20 million Californians--including nearly all of the 17 million enrolled in HMOs--is essentially the first move in what is likely to be a long and intricate political game, as emboldened Democrats make plans to reform health care at both the state and national levels.

The announcement comes at a time when the image and financial condition of HMOs and other managed-care companies could hardly be worse. Consumers and politicians have roundly criticized managed care for denying needed treatments and, in several dramatic recent cases, dumping thousands of elderly patients from Medicare HMOs.

Many companies are either losing money or bringing in profits of less than 2%, and most have raised premiums. In New Jersey, HIP Health Plan--the state’s fourth-largest HMO--failed spectacularly in October and was taken over by regulators.

The California plan, which is part of a nationwide effort to improve the industry’s tattered image, was praised by the Clinton administration, but officials cautioned that a voluntary program would not provide consumers with the same assurance as one backed by the force of state or federal law.

“This is a welcome first step but it doesn’t go far enough,” said a senior White House health-policy official. “The president believes that all patient protections included in the patients’ bill of rights, including a strong enforcement mechanism, should be provided in every health plan.”

California’s health-maintenance organizations are the first in the nation to voluntarily announce such a program.

The American Assn. of Health Plans, which represents more than 1,000 plans nationally--including those in the California association--is considering following California and adding to its code of conduct a requirement that member plans allow patients to obtain an independent review of medical decisions, said Susan Pisano, a spokeswoman for the trade association.

In California, the new program also represents a coming out of sorts for Walter Zelman, a high-profile consumer health-care advocate who the HMOs and managed-care companies hope will give them a new, patient-friendly image as the president of the California Assn. of Health Plans.

Zelman, a former Harvard professor who worked on the failed 1993 Clinton health-care initiative, said companies hope to alleviate consumer concerns that money, rather than medical necessity, might govern the decisions made by a doctor in a managed-care plan.

“This effort is aimed at addressing the single greatest fear that people have--that in some critical circumstance they may be denied care that they may need,” Zelman said in an interview Wednesday. “And this is aimed at addressing that fear.”

Independent review of denial of treatment is increasingly sought by doctors and consumers, who say that health plans sometimes decide whether to pay for a particular medical treatment or test based more on cost than medical need.

In Texas, where a state-mandated review program has been in place for one year, the independent panels have overturned 49% of denials made by managed-care plans.

The new California programs will go into effect over the next year. Some companies, including HealthNet and PacifiCare of California, already have some of the tenets in place. But at Kaiser Permanente, officials are so certain that the Legislature will enact its own program for external review that the managed-care giant has decided to wait until the end of the 1999 legislative session before implementing the voluntary plan.

“If by the end of ’99 it appears that the Legislature isn’t going to enact something, then we will enact something,” said Dr. Les Zendle, associate medical director of the Southern California Permanente Medical Group.

Larry Levitt, head of a health-care think tank and philanthropic organization funded by the Kaiser Family Foundation, welcomed the California plan as a step toward helping consumers resolve disputes with health-care providers.

“Both the hiring of [Zelman] and this announcement send a similar signal--that they do want to reach out to constituencies and elected officials who they generally haven’t had such good relations with,” said Levitt, director of the Changing Healthcare Marketplace Project & California Grants Program for the Kaiser Family Foundation. “They want to present a friendlier face to the industry.”

It remains to be seen, however, how effective the program will be--and whether it will achieve the unstated goal of staving off legislation. Key details, such as how the companies will choose the doctors for the panels and how they will be paid for their efforts, have not yet been worked out.

In addition, the panels will be strictly limited to appeals of medical decisions. Consumers who have been denied a treatment that the HMO says is not covered, or who inadvertently fail to follow HMO guidelines in seeking treatment and are therefore denied reimbursement, will continue to have little recourse.

And since each of the companies will set up its own appeals process, consumers are likely to encounter confusing and perhaps even conflicting rules if they switch to a new HMO.

Moreover, the companies say that consumers will still be required to exhaust existing internal appeals processes before going outside. And while Zelman says disputes will be resolved quickly, consumer advocates say it can sometimes take months to navigate the existing internal systems.

“It’s a very, very modest step, and maybe even a step in the wrong direction,” said Betsy Imholz, a senior attorney handling health-care issues for the Consumers Union in San Francisco. “Only the broadest questions have been answered.”

Consumer advocates also question the voluntary nature of the plan. “What you lose with the voluntary system is government oversight,” said Nicole Tapay, an attorney and professor of public policy at Georgetown University. “With a voluntary system, there’s no enforcement mechanism.”

A better idea, these advocates say, would be for the California Legislature to mandate a uniform process for appealing medical and coverage decisions.

At least 16 states have already passed such laws, and the federal Medicare system also requires that HMOs and managed-care companies administering its programs adhere to an external review process.

In California, the Legislature already requires that terminally ill patients be allowed to appeal when requests for certain treatments are denied, and last year three bills were introduced mandating outside review for medical decisions by managed-care companies and imposing stricter liability on firms whose gatekeepers deny needed care.

All three of the bills were withdrawn in the midst of squabbling among consumer advocates and concerns that Gov. Pete Wilson would veto them. But Gov.-elect Gray Davis is viewed as more supportive of consumer concerns, and the Legislature is expected to take up the issue again next year.

On the federal level, outside review is a key part of the proposed patients’ bill of rights that Congress is expected to take up later this year.

“Our real concern is having a market-based solution,” said Ron Williams, president of Blue Cross of California and vice chairman of the board of the California Assn. of Health Plans. “It’s difficult to know what the Legislature would or wouldn’t do.”

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Health-Care Appeals Panels

Health-care companies representing nearly 20 million Californians in HMOs and other forms of managed care say they will allow consumers to appeal to an outside panel of experts when denied medical treatment. The decision by the California Assn. of Health Plans is meant to help restore consumer confidence in managed care, but it has not won the support of many consumer advocates, who call it vague and difficult to enforce.

The appeals process will:

* Allow patients who have been denied a medical treatment to appeal to an independent panel of doctors.

* Require participating health plans to provide the treatment if the panel decides it is necessary.

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The appeals process won’t:

* Allow patients to appeal denials that are not based on medical necessity, such as when the health plan says a particular treatment is not covered or when a consumer does not follow the correct procedure and is denied reimbursement.

* Increase consumers’ ability to sue their HMO or managed-care company.

* Increase managed-care companies’ liability for bad outcomes resulting from denial of care.