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Health Maintenance Organizations (HMOs) are a critical element of the nation's healthcare delivery system. However, HMO are also increasingly controversial.

HMOs were founded with two key goals:

  1. Improving public health through preventative care; and

  2. Containing health care expenditures.

Concern by some members of the public over medical services provided by HMOs have lead to both private lawsuits and to legislative activity by federal and State governments.

The Wrong Way to Regulate HMOs

There has been a disturbing trend in some controversial industries, such as firearms manufacturing, software and lead paint, for federal, State and/or city governments to file or facilitate lawsuits. These Regulation by Litigation lawsuits seek to force changes in the way the industries operate (and often to obtain revenues for the governments) without going through a normal legislative or regulatory process. Such Regulation by Litigation suits undermine the legislative body's policy making prerogatives and, thereby, the ability of the public to decide how they will be governed.

So far, lawsuits against HMOs have been limited to private actions. However, even in these private suits, there is some cause for concern. The Employment Retirement Income Security Act of 1974 (ERISA) granted HMOs some protection against lawsuits for the denial of health care benefits. HMOs have also been protected from class action lawsuits by certain state laws precluding malpractice suits.

However, the protection against lawsuits granted through legislation is being weakened by a series of court decisions. The Washington Post, in an August 15, 1999 article, pointed out that:

In a string of rulings over the last twenty months, judges across the country have begun allowing patients to sue health maintenance organizations for medical malpractice, after years in which such claims were repeatedly rejected by the courts.

Although these court decisions may not fit the traditional definition of Regulation by Litigation since the suits were not brought by government, they may well be Regulation by Litigation if the Executive Branch becomes involved with the Judicial Branch. In either event, the result is the same, public policy being determined in the court house instead of the legislature.

The Right Way to Regulate HMOs

If there is a consensus that change are needed in the way HMOs operate or in the ability of private parties to bring suit against HMOs, Congress, not the Executive Branch through a third party, should pass legislation concerning health care providers.