NCPA - National Center for Policy Analysis

RICO Vs. Managed Care

December 30, 1999

Legal observers warn that trial lawyers have hit on a farfetched -- but potentially costly -- way to sue the managed care industry: using the federal Racketeer Influenced Corrupt Organizations Act (RICO) on managed care providers.

RICO was designed by Congress to keep organized crime out of legitimate business. Here's how trial lawyers charge managed care providers violate the RICO statutes.

  • They fraudulently entice policyholders with claims of high quality health care, then fail to deliver on their promises.
  • They defraud doctors and patients of their right to an honest doctor-patient relationship through shadowy contractual arrangements.

But observers note these offenses are simple breach of contract complaints that could be handled in state court. So why are trial lawyers trying to invoke RICO? Money. RICO carries triple damages and the prospect of astronomical attorneys' fees

Part of the problem is the vague wording of the statute.

  • Congress didn't clearly define "racketeer."
  • There's also no clear definition of "organized crime."
  • Therefore, Congress stressed "predicate acts," or a history of offenses, which trial lawyers impute, improbably, to managed care providers, from extortion and transporting stolen goods across state lines to using the mail.

Critics warn the ultimate losers will be patients, who will pay higher fees and suffer an erosion of trust between themselves and their health plans and doctors.

Source: William H. Lash III, "RICO Recklessness," Investor's Business Daily, December 30, 1999.


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