Monday, June 21, 2004

A happy day for HMOs

It's a happy day if you're an HMO. The Supreme Court has ruled that HMOs cannot be sued in state court for damages arising from witholding medical care against a doctor's orders. HMOs can now only in Federal court, where awards are capped at the cost of the care withheld.

If you think this through, this makes it fiscally irresponsible for an HMO to pay for any medical care at all! If they pay then they're out the money. But if they don't pay then the worst case scenario for them is that they have to pay out that exact same amount of money. And, of course, if they don't pay then they have all sorts of opportunities to avoid paying forever, like if the care really did turn out to be unnecessary, or of the patient doesn't decide to sue for one reason or another, or if they prevail in court.

Of course, if an HMO really stopped paying altogether they'd probably stop getting customers, so the wisest course of action for an HMO now is to pay out the bare minimum necessary to keep up the appearance that the HMO is not just a scam. But any more than that and the HMO faces a lawsuit by its stockholders. I wonder if the damages would be capped in that case.

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