With patients' rights bill, it pays to consider the source of HMO numbers
By Brooks Jackson
July 17, 1998
In this story:
WASHINGTON (CNN) -- As Congress debates whether to pass a patients' rights bill, all sides agree on one thing: It would raise the cost of health care. But by how much?
A few cents per day? Or by a punishing 39 percent? Studies exist to back up such seeming extremes.
Perhaps not surprisingly, the high figures come from those who want to kill the legislation, and the low numbers from those who support the idea of such a bill.
And one problem, when trying to study the costs from various studies, is the lack of comparable data.
In any case, it pays to consider the source.
Three studies, three sets of costs
For example, one study released last year estimated that health-insurance premiums would "most likely" rise 23 percent, or possibly as much as 39 percent.
It was paid for by Citizens for a Sound Economy, a Republican-leaning advocacy group that describes itself as "market-oriented" and is generally hostile to government regulation of business.
Another study, released last April, predicted possible maximum costs of more than $360 billion over five years for four elements of patients' rights bills.
That study was released by the HMO lobby itself -- the American Association of Health Plans, a trade group representing more than 1,000 HMOs and other managed-care companies. Their profits could be hurt if a patients' rights bill passes.
Then there's a study from the private, nonprofit Kaiser Family Foundation. The group estimated it would cost as little as $2.24 per family per month -- and no more than $5.46 per month -- to enact the basic features of patients' rights legislation.
What are the assumptions?
There's more to these differences than new math.
For one thing, the HMO lobby based its study on the most pessimistic assumptions, some of them questionable.
It assumed, for example, that the bill would require HMOs to do business with any willing doctor or hospital, destroying the ability of HMOs to squeeze discounts from providers of medical services.
The bill's sponsors deny their legislation would do that. But the HMO lobby still assumed it would, and tacked $103 billion onto the possible five-year cost.
On the other hand, the original Kaiser study failed to include the cost of a key feature of a Democratic version of the bill: allowing patients the right to sue HMOs for damages, which federal law now prevents in most cases.
(For the record, the Kaiser Foundation does not lobby and does not endorse any legislation. But its studies are often cited by advocates of patients' rights bills.)
The HMO lobby's study estimated that the lawsuit provision alone would raise health-care premiums anywhere from 2.7 percent to 8.6 percent, as much as $1,512 per worker over five years.
Last month, the Kaiser Foundation came up with its own, much lower estimate for the right-to-sue provision.
This second Kaiser study looked at the actual experience of 1 million public employees in California, those covered by the California Public Employee Retirement System (CalPERS).
Because state and local employers are not covered by federal pension law, they can sue their managed-care companies for damages. But the Kaiser study found they don't do it very often, and don't collect all that much when they do.
The Kaiser study -- which also covered public-employee plans in Colorado and the Los Angeles school district -- found the cost of lawsuits was only 3 cents to 13 cents per employee per month. That included all damage awards and settlements, as well as court costs.
However, it did not include the hard-to-estimate costs of "defensive medicine," the added tests and treatments that doctors might order just to keep from being sued. The HMO lobby says that's a bigger cost that the expense of the lawsuits themselves.
In truth, all sides agree that their estimates are mostly guesswork, and that nobody has much solid information to go on.
Washington asks: 'Who paid for it?'
If all this seems bewildering, it is. But help arrived Thursday in the form of an official estimate from a neutral source -- the Congressional Budget Office (CBO). And it will not make the HMO lobby happy.
The budget office spent weeks examining the most ambitious of all the patients' rights proposals, a bill backed by the Democratic leadership that included the right to sue.
Where the HMO lobby had claimed the right to sue would boost premiums anywhere from 2.7 percent to 8.6 percent, the budget office put the cost at a mere 1.2 percent -- "defensive medicine" costs and all.
And where the conservative Citizens for a Sound Economy had claimed health insurance premiums would likely go up by at least 23 percent, the budget office's official estimate -- including the right-to-sue provision -- is just 4 percent.
CBO estimates carry great weight in Washington. The budget office has a reputation for objective, nonpartisan analysis.
So when the CBO says, in effect, that the HMO lobby's cost figures are vastly inflated, it's just one more reason why, in Washington, the first question to be asked about any study is, "Who paid for it?"
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