Date of this Version
The Journal of Legal Studies
Managed care organizations (MCOs), as insurance entities, should be liable under contract for inappropriate denial of coverage, whereas treatment errors should be conventional malpractice claims against physicians. Most MCOs are loose networks of independent practices that lack the requisite information or technology to improve care. Holding such MCOs vicariously liable for their physicians’ negligence would lead to increased “false positive” claims and distort deterrence. Integrated MCOs already contractually assume responsibility for the negligence of their salaried physicians, which appears to be efficient. Maintaining the distinction between medical error and coverage denial requires that treatment decisions be evaluated relative to a standard of care that recognizes common MCO control strategies. Class actions against MCOs are based on the false premise that MCO cost control strategies harm patients. Charges that enrollees were led to expect more coverage than they actually received imply, if true, that HMOs should have realized supernormal profits, for which there is no evidence.
Danzon, P. M., & Sloan, F. (2001). Comments on “The Assault on Managed Care: Vicarious Liability, ERISA Preemption, and Class Actions”. The Journal of Legal Studies, 30 (S2), 661-668. http://dx.doi.org/10.1086/342339
Date Posted: 27 November 2017
This document has been peer reviewed.