Saying the very future of managed health care may be at stake, an attorney for a group of HMOs yesterday urged the Supreme Court to strike down state laws that give patients more power to choose their own doctors.
At issue in the case is a Kentucky "any willing provider" statute, which, like similar laws in more than a dozen states, requires HMOs to let patients see any doctor willing to meet the health insurer's conditions for participation in its network, whether the HMO selected that doctor for the network or not.
Such laws were passed to address the common complaint that HMOs excessively restricted patients' choices, but the attorney, Robert N. Eccles, said they create "uncertainty" in the industry and run afoul of a 1974 federal law that gives the U.S. government exclusive power to regulate employee benefit plans.
Managed care cost-containment -- and profit -- hinges on assigning large numbers of patients to a limited number of health-care providers, who agree to serve them at a discount. Eccles said that "any willing provider" laws increase the cost of providing HMO benefits by 15 percent, thus defeating the purpose of an institution that won predominance in American health care because it saved employers money on health benefits for their employees.
Yesterday's case was the first of two the court will hear this month involving state efforts to regulate health care industries widely blamed by the public for exploding costs and declining quality.
A week from today, the court will hear arguments in a major prescription drug case -- an industry challenge to a Maine law that uses the state's buying power as operator of a Medicaid program to force drugmakers to reduce prices on prescription medications sold to uninsured residents. Drugmakers argue that the Maine law is an unauthorized use of Medicaid, and that it puts the state in the business of regulating interstate commerce, in violation of the Constitution.
In both cases, if the state laws are upheld, the chances are strong that other states will enact similar measures, especially because Congress appears deadlocked on health care issues.
The Bush administration has weighed in on the state's side in the Kentucky case, but supported the drug manufacturers in the Maine case.
Last year, the Supreme Court upheld an Illinois law giving patients the right to seek an independent doctor's ruling when their HMOs deny benefits for particular procedures or medications. In that case, the court held, 5 to 4, that the Illinois law was a regulation of insurance, and thus exempt from the 1974 federal law.
A similar question -- whether Kentucky's HMO law regulates insurance -- was at the heart of yesterday's Supreme Court debate.
Eccles insisted that Kentucky's law does not regulate insurance because it does not change the "legal rights" patients have under the insurance contract between an employer and a given managed-care firm.
But several members of the court seemed to have difficulty reconciling that with his claim that "any willing provider" laws threatened sweeping upheaval.
"That really doesn't seem to make sense to me," Chief Justice William H. Rehnquist told Eccles. Rehnquist returned to the bench for oral arguments this week after a two-week absence caused by a knee injury.
"It seems to me that this does regulate insurance," Justice Anthony M. Kennedy added.
The attorney representing Kentucky insurance Commissioner Janie A. Miller, Elizabeth A. Johnson, argued that the law regulated insurance under a "common sense" definition of insurance.
But Justice Antonin Scalia objected that this was at odds with the court's holding in a previous case, known as Royal Drug.
"I don't trust common sense," he told Johnson. "I want some rule of law that we can adhere to. I thought we had one in Royal Drug."
A decision in Kentucky Association of Health Plans v. Miller, No. 00-1471, is expected by late June.