Since 1975 the value of everything has gone up, except the value of my son’s life under California law.

Last week my son, Steven and I went to Sacramento to say “38 years is too late.” We announced a ballot initiative to create stronger patient safety laws and adjust this nearly 38 year-old law. You can join our efforts by reading our story and others of patients like us at the new site “38 is too late” and liking our Facebook page.

In California, no matter how badly a child is hurt, or even if they are killed by gross medical negligence, the value of their life is only $250,000, an amount set by the Legislature nearly 38 years ago. That’s just not right.

When my son Steven was a toddler, he fell on a stick while hiking near his grandmother’s cabin in the mountains. The hospital pumped Steven up with steroids and sent him away with a growing brain abscess, although we had asked for a CAT scan because we knew Steven was not well. The next day, he came back to the hospital comatose. Medical experts later concluded that had he received the $800 CAT scan, he almost certainly would have been successfully treated.

Today, at 23 years old, Steven is blind and has cerebral palsy. Even though a jury heard our case and said Steven should receive $7.1 million for the horrible losses he will suffer for the rest of his life, the judge reduced the amount to $250,000 under California’s one size fits all cap.

The jurors only found out that their verdict had been reduced by reading about it in the newspaper. They expressed their outrage, but the Legislature has not heard them, or patients like me. The cap has not been adjusted for almost 38 years, since Governor Brown signed the law in his first administration.

The ballot measure Consumer Watchdog and The Troy and Alana Pack Foundation announced in the Capitol last week would lift the cap so juries can make their own decisions on a case by case basis. The measure also reforms the state’s Medical Board and creates greater disclosure about prescription drug overdoses and the role of dangerous doctors.

The “38 Is Too Late” group will go to the ballot this fall if the Legislature doesn’t act. I hope you will join me in sending a message to lawmakers that they should act and then join our community online on our website and on Facebook.

You can read more about this historic moment from an article in last week’s Los Angeles Times.
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Posted by Kathy Olsen, Board Member of Consumer Watchdog. Follow Consumer Watchdog online on Facebook and Twitter.

There aren’t too many great days for patient safety in state capitols, where the medical establishment tends to rule the roost through the power of its political giving and tentacles. But Monday was a great day for patient safety in Sacramento, when powerful testimony reminded legislators of the human cost of inaction.

The families of victims of overprescribing spent an hour and half in the Senate and Assembly Business and Professions Committees and presented some of the most compelling testimony ever heard there. Their stories and faces were felt around the Capitol Tuesday from huge photographs on the front pages of the Sacramento Bee and Los Angeles Times to TV news stories echoing legislative sympathy for reform.

The medical establishment is now on the defensive. A Medical Board overhaul is in the air. Debate is turning to the government not protecting patients enough.

Will the clarity these courageous families brought to the failure of California’s laws to protect patient safety grow or wither in the coming days? It’s up to us, but I think it will grow.

Carmen Balber and I asked in an oped in Monday morning’s San Francisco Chronicle whether it wasn’t time to pull the plug on the current physician-run medical board. We wrote:

For decades, the medical board has failed to identify dangerous practice patterns, such as over-prescribing, which should trigger investigation. In fact, the board only acts on complaints by consumers, and then rarely. Once an investigation is begun, it takes years to resolve, too long for patients who may be at imminent risk of harm.

When prosecuted, an enforcement case can stagnate in five layers of review. Sadly, little other deterrence exists to medical negligence.

Those listening to the tragic stories in Sacramento this week could not help but understand the human consequences of such inaction. Sons, daughters, brothers, uncles lost. Preventable deaths.

All because the California Medical Association and the state medical board it controls won’t agree to a $9 increase in physician license fees — the cost of two cappuccinos — for workers to find overprescribing doctors in a state database. And due to the grip of this medical establishment over our regulators and the legal system — where families who lose nonwage earners to dirty doctors cannot get legal representation due to a 38 year-old cap on their recovery.

We called for these changes in Monday’s Chronicle.

A true overhaul of physician discipline would move complaint investigators into the attorney general’s office to work hand in hand with prosecutors and would create a public-member majority on the medical board.

Real reform should also include mandatory random drug testing of high-risk surgeons and physicians – as is mandated now for bus drivers, college athletes and pilots. Finally, the state’s 38-year-old limits on the rights of injured patients need to be revisited, too. It’s time for the public to take the power back for itself.

It’s Wednesday morning. Eyes are wide open. And we are a lot closer to patients taking power back than we were before.

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Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

In response to consumer complaints and a class action lawsuit on behalf of HIV/AIDS patients in California, Anthem Blue Cross has agreed to suspend a program that would have barred patients from purchasing certain specialty medications at local pharmacies. Under the program, patients would have been required to obtain their medications by mail order, threatening their health and privacy according to the lawsuit.

Blue Cross announced the suspension of the mail order program in a letter arriving in consumer’s mailboxes this week. Download a copy of the letter here.

“The deferment of the mail order program is great news for thousands of Blue Cross customers with HIV/AIDS who were facing risks to their privacy and health,” said Jerry Flanagan, staff attorney for Consumer Watchdog.

The lawsuit, filed last month in San Diego Superior Court by Consumer Watchdog and Whatley Kallas LLC, alleges that the mandatory mail order program illegally targets HIV/AIDS patients. The lawsuit further alleges that due to the complex nature of HIV/AIDS drug regimens, patients rely on their local pharmacists who, working directly with the patients, monitor potentially life-threatening adverse drug interactions, and provide essential advice and counseling that helps HIV/AIDS patients and their families navigate the challenges of living with a chronic and often debilitating condition.

In addition to the health concerns raised by the change in their continuity of care, HIV/AIDS patients have expressed serious concerns associated with a loss of privacy due to the proposed mail order program. For example, HIV/AIDS specialty medications often need to be delivered in refrigerated containers. Patients who live in apartment buildings or need to have their drugs delivered to their place of employment are concerned that neighbors and co-workers who are not aware of their condition will come to suspect that they are seriously ill.

Under the mail order program announced by Blue Cross in December and slated to go into effect on March 1, 2013, HIV/AIDS patients’ insurance policies would have no longer covered medications purchased at local pharmacies.

The deferment is intended to allow Blue Cross, Consumer Watchdog, and Whatley Kallas LCC time to develop a more consumer friendly program.

“Blue Cross should be commended for listening to the serious and heartfelt concerns of their customers who depend on local pharmacists for their life-saving medications,” said Edith Kallas of Whatley Kallas LLC. “We look forward to working with Blue Cross to ensure its mail order program benefits consumers without unfairly targeting its most vulnerable patients and providing them appropriate opportunities to choose what is best for them.”

Download the lawsuit filed by Consumer Watchdog and Whatley Kallas, LLC here.

In its quest for more profits, Anthem Blue Cross has begun telling patients who have very serious diseases and need so-called “specialty drugs” that they cannot use their local pharmacy where many have long term relationships, but must instead order their life-saving medications from a mail-order pharmacy.

As Los Angeles Times Consumer Columnist David Lazarus recently noted, specialty drugs are used for complex conditions and can cost thousands of dollars a month. Patients suffering from chronic diseases like HIV, cancer, and hemophilia use such medicines.

In the Los Angeles area HIV patients are particularly hard hit by Anthem’s unilateral decision that after Jan. 1, patients needing specialty drugs to treat their conditions must buy them from mail-order pharmacy CuraScript.

In a letter to patients, the insurance giant wrote:

“Using a retail pharmacy will be considered going out-of-network. And your plan doesn’t have coverage for that. So you’ll have to pay the full price of the drug.”

According to Lazarus Jacques Liberman, 57, of Cathedral City received one of the letters the other day. He is HIV-positive and takes a drug called Atripla to help prevent his condition from transforming into full-blown AIDS.

“Who is Anthem to tell me where I have to buy my medicine?” Lazarus quoted him as saying. “Why should I have to buy it from some mail-order company instead of the drugstore that I have been going to for a long time?”

But it’s more than just an in infringement on personal freedom. Patients who need specialty medicines suffer from complex disease that require complex treatment. The pharmacist is virtually a member of the treatment team offering advice and closely monitoring the patient’s condition.

David Balto, a Washington attorney who represents some of the specialty pharmacies, explains the relationship like this:

“Specialty pharmacies, the pharmacies that carry these rare, expensive drugs, build strong personal and clinical relationships with their patients, making sure that they receive the drugs they need when they need them. Most also provide a full slate of advising and counseling services to help patients and their families navigate the challenges of living with a chronic and often debilitating condition. Many specialty pharmacies also have programs to help low-income patients afford their ever rising co-pays.”

Anthem proposes to replace that relationship with an 800 number. Anything for a buck, I suppose.

What’s not clear yet is what can be done to stop this abuse. Consumer Watchdog is investigating. If you’ve been affected by the change please let us know.

Reporters largely missed the point of a Commonwealth Fund study released this week, that looked at consumer savings under Obamacare’s 80-20 rule, the rule making insurance companies spend at least 80% of your premiums on health care, not overhead.

The authors started with a fact we already knew — that health insurance companies had to pay $1.1 billion in rebates for missing the MLR requirement in 2011 — and that big shiny number distracted the news media. But the authors zeroed in on a much more important fact. Insurance companies successfully reduced administrative costs by $1.184 billion in 2011, but they used those savings to increase profits instead of passing them on to consumers.

Clearly the 80-20 rule isn’t working to contain profits and hold down premiums, especially in states that don’t have tough regulation of insurance premiums.

California Insurance Commissioner Dave Jones launched an audit this week of the state’s largest health insurers to determine if consumers paid too much when insurers were actually saving money and boosting profits. The Commonwealth study found that in California, insurance companies increased profits for individual plans by $88 per member or about $90 million, even though administrative costs went down and every major insurance company imposed rate increases.

These results are more evidence that states need the ability to say no to rate manipulation. Otherwise, insurance companies will keep premiums artificially high to make sure profit numbers stay high too. As we warned HHS Secretary Sebelius more than two years ago:

“In the same way that a Hollywood agent who gets a 20 percent cut of an actor’s salary has an incentive to seek the highest salary, insurers will have incentive to increase health care costs and raise premiums so that their 15 percent or 20 percent cut is a larger dollar amount.”

As Jones said when announcing the audit:

“I have long pushed for the authority to reject excessive health insurance rate increases and this study provides further evidence of why this change in the law is long overdue in California. Health insurers and HMOs continue to impose double-digit premium increases each year and are making larger profits when selling to individuals and families even during these tough economic times.”

Californians will finally have the chance to stop them, by voting at the next ballot on an initiative measure to require health insurance companies to publicly justify rate increases and get approval before they take effect. Learn more at justifyrates.org
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Posted by Carmen Balber, Washington DC Director for Consumer Watchdog and Consumer Watchdog Campaign

Consumer Watchdog Thursday welcomed a report from the prestigious Institute of Medicine (IOM) calling for sweeping reforms in governance at California’s stem cell agency and an end to the board’s built-in conflicts of interest.

The report said that “far too many board members represent organizations” that receive funding or benefit from the stem cell agency. The IOM said that the board’s oversight function should be separated from the day-to-day management of the California Institute for Regenerative Medicine (CIRM).

“The IOM’s critical report echoes what every independent evaluator has said in the past,” said John M. Simpson, Consumer Watchdog’s Stem Cell Project director. “As we have repeated from the beginning, CIRM suffers from built-in conflicts of interest and needs to separate the board’s oversight function from day-to-day management.”

“It’s long past time to make the changes the report calls for, but given the spin the agency put on its response — saying the report praises the ‘agency as a bold innovation’ — shows it’s business as usual. This sort of behavior will only ensure that CIRM doesn’t get another round of public funding,” Simpson said.

CIRM is expected to run out of money for new grants by 2017. CIRM paid $700,000 to IOM for the report.

Click here to read the IOM release.

Click here to read CIRM’s release.

The IOM report said neither the chairman nor board members should be members of the agency’s working groups. It recommended the working groups report to the agency’s president.

IOM said CIRM should expand its definition of a conflict of interest beyond financial conflicts including such things as the potential for personal conflicts of interesting arising from one’s own affliction with a disease of personal advocacy on behalf of that disease.

Commissioner Dave Jones Sides With Consumers, Echoes Concerns Raised by Consumer Watchdog in Lawsuit Over the So-Called “Death Spiral”

Santa Monica, CA – Consumer Watchdog praised Insurance Commissioner Dave Jones’ announcement today opposing Blue Shield’s plan to close 23 health insurance policies, and echoing concerns raised by Consumer Watchdog in a recently-filed class action lawsuit.

Consumer Watchdog said, however, that as many as 100,000 Californians are still trapped in closed or lower-benefit health plans following policy closures carried out by Blue Shield’s affiliate regulated by the Department of Managed Health Care in 2010.

“Blue Shield is on notice that the company’s plan to close health insurance policies fails to protect consumers as the law requires,” said Jerry Flanagan, staff attorney for Consumer Watchdog. “If Blue Shield decides to go forward with the policy closures, we look forward to working with the company to implement a consumer-friendly plan. We also hope that Blue Shield will ensure that consumers affected by the 2010 policy closures will finally benefit from the protections mandated by law.”

The lawsuit filed by Consumer Watchdog and Whatley Kallas, LLC alleges that Blue Shield is illegally gaming the health insurance system by alternately closing older policies and opening new ones in order to push older, sicker consumers who are more expensive to insure into lower benefit, higher deductible coverage that requires consumers to pay more out of pocket.

The lawsuit seeks to stop Blue Shield from shoving its policyholders into what is known as a “Death Spiral”–the industry term for what happens when a health insurer “closes” certain insurance policies to new customers, and later raises rates to those remaining in the closed policy until those enrollees can no longer afford coverage. Since consumers with preexisting conditions cannot switch to a comparable or better policy, consumers trapped in the closed policies must either accept greatly inferior coverage or face bigger and bigger premium increases.

Download the lawsuit filed in San Francisco Superior Court here

According to legislative records, it was Blue Shield’s own past business practices, resulting in Death Spirals for consumers, that spurred the Legislature to adopt the same 1993 law that Consumer Watchdog and Whatley Kallas, LLC now allege the company has violated.

The policy closures are taking place among certain insurance plans in the individual market. California law requires that when health insurers close a policy the insurer must either offer consumers new comparable coverage, or minimize rate increases on the closed policies.

Two regulatory agencies – the California Department of Managed Health Care (“DMHC”) and the California Department of Insurance (“CDI”) – oversee different segments of Blue Shield’s insurance business. In the lawsuit, Blue Shield is accused of illegally closing eight policies regulated by the DMHC in 2010, and announcing it would close 23 policies regulated by the CDI on July 2, 2012 without offering consumers comparable policies or limiting rate increases as required by law.

Consumer Watchdog and Whatley Kallas, LLC settled a similar class action lawsuit last year targeting Blue Cross of California’s illegal Death Spiral practices. Read more about that lawsuit and settlement here. Under the terms of that settlement, Blue Cross must both offer consumers in the closed policies access to comparable coverage and limit rate increases in the closed policies if consumers choose to remain enrolled in the older, closed policy.

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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org

WhatleyKallas has earned a national reputation-based on trust, respect, demonstrated commitment and tangible results-in connection with its representation of healthcare providers and members of the organized medicine community. The firm’s lawyers have negotiated settlements with most of the major health insurers in the country on behalf of hundreds of thousands of consumers, physicians and medical associations that resulted in monetary relief and revolutionary practice changes valued in the billions of dollars. These settlements fundamentally changed the way managed care companies do business. The lawyers of WhatleyKallas have been repeatedly recognized in legal publications, such as “The National Law Journal” and “American Lawyer”, by their peers and by leaders of organized medicine for our work in the healthcare field. For more information, go to: http://www.whatleykallas.com/

Just when consumers are finally getting a look at how health insurance companies conduct their business, the industry is racing to shut and lock the door. Buried deep in a “model law” for states to update health insurance regulation is a clause that would keep secret the companies’ justification for exorbitant rate increases.

Photo: 401k 2012 / Flickr.

Why’s this so bad? Because one of the few ways patients and consumer groups can tell whether a rate increase is justified is to closely examine the data-heavy actuarial reports that insurers use as their defense. In states with consumer-friendly insurance commissioners, some have found gross math errors in favor of the companies. (Simple mistakes? Maybe.) Without access to actuarial and other related data, consumers can’t even hold an unfriendly insurance regulator to account, much less force the company to back down.

The “model law” is being drafted by the National Association of Insurance Commissioners, a private body of state insurance commissioners. It has long been criticized for being too cozy with the industry. The NAIC, however, has also drafted a lot of the regulations governing health insurance reform nationally, with the explicit approval of the Department of Health and Human Services. So what the NAIC says and does matters to every insurance policyholder.

Here’s the industry-friendly secrecy clause tucked into the NAIC’s model law, which most states would closely follow in drafting their own laws:

Each health carrier shall file with the commissioner annually on or before March 15, an actuarial certification certifying that the carrier is in compliance with this Act and that the rating methods of the carrier are actuarially sound. The certification shall be in a form and manner, and shall contain such information, as specified by the commissioner. A copy of the certification shall be retained by the carrier at its principal place of business.

(3) (a) A health carrier shall make the information and documentation described in paragraph (1) available to the commissioner upon request.

(b) Except in cases of violations of this Act, the information shall be considered proprietary and trade secret information and shall not be subject to disclosure by the commissioner to persons outside of the Department of Insurance except as agreed to by the health carrier or as ordered by a court of competent jurisdiction.

Read the rest of this entry →

Thursday’s reports that some Californians will get rebates on their health insurance premiums are a little bit of good news–but not nearly as good as it could be.

An L.A. Times story reports that California small businesses and their employees who are insured by United Health Group will get rebates averaging $98 on last year’s premiums because United Health didn’t spend at least 80% of the premiums on health care, a requirement under the federal health reform. The total will come to about $3.5 million in the state. Other insurers may also owe money on small business, large employer and individual policies–the figures are still being crunched.

But what if insurance companies could not overcharge us in the first place? The 80% rule in the federal law only encourages insurance companies to pay hospitals and doctors inflated prices, because it inflates the 20% that insurance companies get to keep. (It’s like the Hollywood agent who gets a 15% cut–his personal incentive is to get the biggest price for his client.) With no real curbs in California on how much insurance companies can charge, they have no incentive to bargain for lower medical costs to begin with.

Unlike 35 other states, California has no power to make health insurance companies justify their rates and to deny or modify unreasonable or unjustified rates before they go into effect. Californians also have no right to make the state do its job through consumer challenges to unjustified rates. All this would change if voters pass an initiative, sponsored by the Consumer Watchdog Campaign, that’s headed for the November ballot.

Which brings us to another huge source of savings–the inflated rates that insurance companies encourage hospitals and in some cases doctors to charge. A shocking recent story, also in the L.A. Times, found that patients who are insured are often paying out of pocket many times the amount of patients who pay cash for the same treatment.

Here, from the story, is how it works:

Many hospitals, doctors offer cash discount for medical bills

The lowest price is usually available only if patients don’t use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.
May 27, 2012|By Chad Terhune

A Long Beach hospital charged Jo Ann Snyder $6,707 for a CT scan of her abdomen and pelvis after colon surgery. But because she had health insurance with Blue Shield of California, her share was much less: $2,336.

Then Snyder tripped across one of the little-known secrets of healthcare: If she hadn’t used her insurance, her bill would have been even lower, just $1,054.

“I couldn’t believe it,” said Snyder, a 57-year-old hair salon manager. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”Unknown to most consumers, many hospitals and physicians offer steep discounts for cash-paying patients regardless of income. But there’s a catch: Typically you can get the lowest price only if you don’t use your health insurance.

That disparity in pricing is coming under fire from people like Snyder, who say it’s unfair for patients who pay hefty insurance premiums and deductibles to be penalized with higher rates for treatment.

The difference in price can be stunning. Los Alamitos Medical Center, for instance, lists a CT scan of the abdomen on a state website for $4,423. Blue Shield says its negotiated rate at the hospital is about $2,400.

When The Times called for a cash price, the hospital said it was $250.

Is your blood boiling yet? Insured patients can try to pay the cash price, but elsewhere in the story we find that hospitals may not even allow patients with insurance to get the cash price. And if you pay cash, it doesn’t count against your deductible or the out-of-pocket limit for your policy. Is this cozy or what for the (usually for-profit) insurance companies and (often for-profit) hospitals?

If California had the power to approve, deny or modify unjustified health insurance rates before they went into effect, the insurance companies would have to do more than prove they’re spending 80% of your premium on whatever they can define as “health care.” With their books open and both consumers and regulators looking on, they’d have powerful incentives to push harder to bring down costs, just as auto insurance companies do—in large part because regulators are watching. Executive compensation in the millions would no longer come out of patients’ pockets.

That form of regulation, called “prior approval” of rates, is the aim of the ballot initiative sponsored by the Consumer Watchdog Campaign. The same kind of regulation, passed by voters as Proposition 103 in 1988, already saves hundreds of millions of dollars a year on average for auto and homeowner insurance buyers in the state. In just the first nine years after voters passed Prop 103 in 1988, property and casualty insurance companies had to fork over more than $1 billion in consumer rebates–similar in type to the $3.5 million United Health is paying.

It’s no surprise that the health industry is one of the state’s most powerful political lobbies. It’s no surprise that such lobbying power has killed every effort to pass effective control of health insurance rates in the Legislature. It’s also no surprise that stories like the one above are making voters furious. At least voters, unlike too many politicians, don’t have to do what the health insurance industry tells them to do.
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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Next week we will be turning in the signatures for our ballot petition to force health insurance companies to justify their rates and get permission before instituting their rate hikes.

Download, sign and return in the mail by the end of the weekend to be part of the signature turn-in or forever hold your peace.

This short video preview of the initiative by our friends in Hollywood explains why this is the most important autograph you will give this year.