Legal Challenges To Managed Care Cost Containment Programs: An Initial Assessment

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Abstract
PROLOGUE:In a legal system as freewheeling as America's, the protection afforded health plans under the Employee Retirement Income Security Act (ERISA) is viewed by many as anomalous. Under this provision, health plans covering approximately 140 million Americans are largely protected from liability in lawsuits involving denials of payment for medically necessary care. This once prompted Senate minority leader Tom Daschle to ask, “Why is it we only give immunity to diplomats and HMOs?”Partly in an effort to redress this imbalance, policymakers have been considering various forms of so-called right-to-sue legislation, whereby plans would no longer enjoy the kind of protection to which they have become accustomed. Opponents of such legislation claim that it would interfere with managed care cost containment efforts, ultimately pricing many people out of health insurance. Yet, judging from cases that have made it to court thus far, such fears may be unfounded. For as Peter Jacobson points out in this paper, to date courts have not systematically impeded managed care cost containment techniques, choosing instead to defer to markets.Jacobson is an associate professor at the University of Michigan School of Public Health. He has been toiling at the intersection of health and law for more than a decade now and in 1995 won a Robert Wood Johnson Foundation Investigator Award to examine the courts' role in shaping health policy. He holds a law degree from the University of Pittsburgh and a master of public health degree from the University of California, Los Angeles. The success of managed care cost containment innovations depends on many factors, including how courts decide litigation challenging various cost containment initiatives. Although such litigation is just emerging, enough cases have been reported to enable an initial assessment of court rulings. To date there is no evidence that courts have systematically impeded cost containment initiatives. Few courts seem willing to usurp legislative choices in formulating health policy or to obstruct the market in organizing and delivering health care services. The anticipated role of the courts as policymakers in shaping health care delivery has yet to emerge.

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