NCPA - National Center for Policy Analysis

Suing HMOs Will Carry A Price

July 26, 2001

If it is eventually passed and signed into law, the patients' bill of rights would remove restrictions against individuals filing suits against their health maintenance organizations if they think they have been denied needed medical care and suffered as a result.

But such suits are bound to carry a price tag, experts point out.

  • First, the threat of such suits will cause HMOs to provide more medical services -- which will ultimately drive up premiums and the cost of co-payments, and will also lower cash wages.
  • Studies show that reductions in liability pressure -- through, for example, reasonable caps on noneconomic damages -- lead to lower health care costs, but not to worse health outcomes for patients.
  • The Congressional Budget Office has estimated that expanding liability in an earlier version of the patients' bill of rights would increase premiums by 0.8 percent -- although adding in the costs of defensive medicine would likely push that figure far higher.
  • Research based on data from the 1990s shows that reforms such as caps on damages lead to hospital expenditures for elderly patients with heart disease that are at least 4 percent lower.

If an unlimited right to sue health plans leads to as much defensive medicine as does the unlimited right to sue doctors and hospitals, then the bill could lead to liability costs that are at least five times larger than the current CBO estimate, experts warn.

Source: Daniel P. Kessler (Stanford Business School), "Want to Sue HMOs? It'll Cost You" Wall Street Journal, July 25, 2001.


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