Herb Denenberg Column for week of July 2, 2001


The most irresponsible segment of American industry has led the battle to limit the right of consumers to file lawsuits. The tobacco industry -- in Pennsylvania, other states and nationally -- has been the moving force over the years behind legislation to limit the rights of victims of dangerous and defective products to seek redress in the courts.


Many other industries with political power have tried to join the bandwagon. The drug industry, the medical profession, aircraft manufacturers along with manufacturers in general, HMOs, and others have joined with the tobacco industry in seeking special lawsuit protection. Some have succeeded. They fool the public by pushing legislation under the guise of tort reform. They say tort reform is designed to prevent frivolous lawsuits and save producers and consumers money. Sometimes, of course, legal reform is in order. But usually the attempts to limit lawsuits are simply efforts for an industry to enhance its profits and escape responsibility and accountability. The lobbyists for the HMOs and other billion-dollar industries somehow brainwash legislators and some of the public into thinking it's in the public interest to place some industries above the law and encourage irresponsible and anti-social behavior.


But this shouldn't even require debate. Why should HMOs not be held responsible and accountable in a court of law when they negligently or maliciously damage a patient? If HMOs are entitled to be free of lawsuits, why not give that special treatment to everyone else? To state the proposition is to prove the special treatment of HMOs is outrageous and ridiculous.


The HMO industry is the classic example or an irresponsible industry made more irresponsible by lawsuit immunity. In 1974, by virtue of the Employment Retirement Income Security Act (ERISA), the HMO industry obtained immunity from certain lawsuits for torts (such as negligence and malpractice) filed under state law, and for years the justice of that immunity has been debated. But the fact that the HMOs could win immunity from lawsuits initially and preserve that immunity during recent years shows how much our political system has been corrupted by the sheer power of billion dollar industries.


What happened to the basic idea that no one is above the law? Why should HMOs be above the law and why should Congress be debating that question for the last five years? In the ongoing debate, no one seems to get back to basics. There isn't the faintest trace of an argument for giving HMOs special protection from lawsuits. In fact, they deserve about the same special treatment as should be accorded the tobacco companies. They have demonstrated irresponsible use of power over the years in denying claims, denying access to doctors, censoring what doctors can tell patients, limiting treatments available to patients, and an endless catalog of other abuses. These abuses have now been well documented and experienced personally by countless doctors and their patients. In reporting on HMOs over the years, I've personally experienced the same HMO arrogance that the industry showers on patients and doctors.


The U.S. Senate, on June 29, 2001, passed a Patients' Bill of Rights giving the victims of HMO abuses the right to sue. It has been hailed as a great victory for consumers, but still has to be passed by the House and signed by the President before becoming law. But there are now cries to water it down further by compromise. But, if anything, the bill should be strengthened as it is now too weak and gives the HMO industry special protection it is not entitled to, and in a real sense, puts it above the law.


Why should patients be forced to seek redress through an independent medical review before going to court, as required by the Senate bill? Such independent medical review should be optional. If it is a fair and efficient process, it will attract patients to seek that route in hopes of avoiding expensive lawsuits. If it is merely a mechanism of delay or loaded in favor of HMOs, it can be avoided altogether.


Why should injured patients be forced to sue in federal courts when an administrative decision is at issue? Under the Senate bill, medical decisions are decided in state courts and administrative decisions in federal courts. Why should HMOs be accorded special rules for the choice of courts?


Why should the flagrant violations of HMOs be subject to maximum "civil assessments" (punitive damages) of $5 million? The theory of this kind of assessment or damages is to properly punish the HMO for its flagrant and outrageous conduct. The appropriate punishment should depend on how outrageous the conduct is and how much of an assessment it will take to get the message across to the HMO. Why should there be arbitrary caps or ceilings on damages to be paid by an HMO?


Most fundamentally, why is Congress arguing about what special protection HMOs need from lawsuits, instead of what special protection and litigation rights patients should have to protect them from the endless record of abuse perpetrated by the HMO industry and the insurance industry as well? The failure to ask this question, shows how the HMO industry and its lobbyists have pushed such an extreme position that they can afford to compromise and still get way more than they are entitled to. The HMO-lawsuit debate indicates how special interests typically push the debate so far to one extreme, that when the public interest offers a compromise it is often a sell-out.


It is easy to prove how phony the pro-HMO arguments are? The HMO advocates say that lawsuits will increase costs. There are many answers to this argument. First, you could argue food manufacturers should be protected from lawsuits alleging the sale of bad food. You could argue that without such protection food manufacturers will face frivolous lawsuits, have litigation costs, and therefore will have to charge more. Even if lawsuits raise costs that is immaterial when they are necessary to rectify improper conduct. Second, it is not clear that responsibility and accountability raise costs. The opposite may be true. Accountability and responsibility will require a more efficient and well-managed operation that should lower costs. Third, even if costs to the HMO are raised, they are likely to be more than offset by lower costs to the patients. When HMOs refuse proper treatment for patients that simply raises patients' out-of-pocket expenses and the costs to society in unnecessary death and injury.


(Herb Denenberg is a former Pennsylvania Insurance Commissioner and consumer advocate.)

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