Update March 6, 2016: HEALTHCARE IS NOT MAIL ORDERED FROM AMAZON!
The Republicans want to repeal the Affordable Healthcare Act but have no specific plan to replace it. We hear unschooled platitudes such as ‘purchasing plans across state lines,’ (even Blue Cross & Blue Shield, in all fifty states, requires state offices) or ‘more competition.’ Those two ‘solutions’ alone belie any claims to understanding the issue.
Simply put, if you support those two solutions it means you have no understanding of insurance and 10th Amendment legitimate state interest in regulating health insurance ‘pools.’ The constitution gives the federal government no powers over state-regulated insurance; for constitutional and economic reasons, the states regulate insurance. Health insurance is a contract between healthcare providers and subscribers, and Article 1 Section 10 obligates the federal government to honor those contracts, without interference.
Are there areas the federal government can provide statutory regulation? Portability is one. Some standards of care for persons with existing conditions should exist when an insurance subscriber must move to another state. Illegal alien care? The federal government must reverse its mandate for unlimited healthcare to illegal aliens. Emergency care has exigent circumstances, but illegal ‘medical emigration’ must end, and that includes ‘birthright citizenship.’ Birthright citizenship to children born of aliens was a gross misinterpretation of the 14th Amendment by the Supreme Court in the Wong Kim Ark case (1898). Immigration from polygamous religions is also a federal mandate that must be enforced (See INA §212(a)(10)(A)).
The last time healthcare worked was in the 1990’s. Those models must be restored and congress deal with issues mentioned above.
Insurance relies on maintaining sufficient ‘pools’ of subscribers; and for this reason healthcare is inherently local, in brick & mortar hospitals and clinic systems run by doctors and administrators. Healthcare is NOT MAIL ORDERED FROM AMAZON! This means that anyone who suggests opening up healthcare plan choices across state lines automatically supports ‘single payer.’ Why? Just like ‘single payer’ you are diluting and destroying local pools in favor of huge foreign HMO corporations which, operating across state lines, must come under federal regulation. That is not a repeal of Obamacare but simply a shell game for suckers.
Healthcare is either a local and state issue, or federal. If you demolish local insurance ‘pools,’ the hospital systems will not survive and you will fall right back into federal ‘single payer,’ which is essentially what the ‘screed’ comment from ‘sound of reason’ at the end of this legal memo (‘sound of reason’ is really a White House director named Macon Philips) reveals.
This Legal Memo took four years to research. If you wonder how automobile insurance abuses have anything to do with Healthcare, well . . . if Illegal Immigration accounts for 33% of your healthcare insurance, automobile insurance abuses taking advantage of the fact that hospitals and emergency services are only a ‘third party’ to recovery of personal injury claims, has more than DOUBLED the cost of your insurance. My memo suggests cutting out the Personal Injury Attorney and making the Hospital Health System an equal party to the plaintiff. The Trial Lawyer Associations will fight this suggestion, but it is the only way to restore the ‘health’ of our Healthcare Systems.
It is now December of 2013. Obamacare (Affordable Healthcare Act) is on the rocks, but unlimited financial and political forces have been mustered to save the shipwreck. This blog, written from my experience fighting a four-year battle with Allstate during its ‘boxing gloves’ agenda (See, ‘From Good Hands to Boxing Gloves,’ David Berardinelli, Esq. Trial Guides 2008, http://www.trialguides.com/book/from-good-hands-to-boxing-gloves-legal/) identified the pattern of fraud and bad faith by one insurance company, creating a model for all other liability insurance companies that undermined fair practices towards Healthcare Service Providers, i.e, your doctor. This is also the model for Obamacare, to STEAL from what was traditionally a fiduciary fund created out of 75% of your insurance premium, protected and regulated monies tagged for fast and fair payment of claims for pain & suffering and medical costs.
Like Social Security, the Federal ‘leviathan’ wants that money, and will deny care and cut reimbursement to hospitals and doctors to do it. This blog reveals the source, the etiology, of this social sickness we call Government, but what has become a soul-stealing police state.
Republicans are on the ropes, and are floundering for an alternative solution . . .this is part of that solution.
http://www.theday.com/article/20131213/NWS01/312139944/-1/NWS Uninsured illegal aliens costing Connecticut half a billion dollars in ER services.
A New Business Model for Personal Injury Settlement;
Health Maintenance Organizations Adopting Duty to Defend
I cannot subscribe to the omnipotence of a state legislature, or that it is absolute and without control; although its authority should not be expressly restrained by the Constitution, or fundamental law, of the state. The nature, and ends of legislative power will limit the exercise of it. This fundamental principle flows from the very nature of our free Republican governments, that no man should be compelled to do what the laws do not require, nor to refrain from acts which the laws permit. There are acts which the Federal, or State, Legislature cannot do, without exceeding their authority. There are certain vital principles in our free Republican governments, which will determine and overrule an apparent and flagrant abuse of legislative power; as to authorize manifest injustice by positive law; or to take away that security for personal liberty, or private property, for the protection whereof the government was established. An Act of the legislature (for I cannot call it a law) contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority. The obligation of a law in governments established on express compact, and on republican principles, must be determined by the nature of the power, on which it is founded. A few instances will suffice to explain what I mean. A law that punishes a citizen for an innocent action, or, in other words, for an act, which, when done, was in violation of no existing law; a law that destroys, or impairs, the lawful private contracts of citizens; a law that makes a man a judge in his own cause; or a law that takes property from A and gives it to B. It is against all reason and justice for a people to intrust a Legislature with such powers; and, therefore, it cannot be presumed that they have done it. The genius, the nature and the spirit, of our State Government, amount to a prohibition of such acts of legislation; and the general principles of law and reason forbid them. The legislature may enjoin, permit, forbid, and punish; they may declare new crimes, and establish rules of conduct for all its citizens in future cases; they may command what is right, and prohibit what is wrong; but they cannot change innocence into guilt; or punish innocence as a crime; or violate the right of an antecedent lawful private contract; or the right of private property. To maintain that our Federal, or State, Legislature possesses such powers, if they had not been expressly restrained, would, in my opinion, be a political heresy altogether inadmissible in our free republican governments. — Opinion of Justice Chase in Calder v. Bull, 3 Dallas 386-389 (1798).
Update: February 1, 2011 A Florida District court has determined the Obama administration’s Healthcare Reform Bill is unconstitutional and void.
However, the mantra of the Democrats continues to be that Healthcare needed to be fixed, and the Republicans have no ideas of their own.
Following is one idea, and it will reduce Healthcare premiums in every state:
Personal injury attorneys charge injury victims 25% to 33.3% in contingency contracts. Thanks to the current adversarial settlement process, helped along by insurance attorneys using a program called ‘Colossus,’ automobile liability insurance companies have reduced traditional settlements by 40%.
Factoring in reduced settlements and trial attorney contingency fees, the courts have denied HMOs recovery of contractually entitled medical costs.
Insurance liability awards that should compensate HMOs and the injured party are inequitably distributed to trial attorneys and the automobile liability insurer. This has contributed to Healthcare premiums more than doubling in the past decade.
Some have blamed illegal aliens abusing federally mandated Emergency Room access. Senator Jim DeMint stated that Medicare and Federal program costs transferred to the healthcare subscriber added 30% to their policies. However, that is beyond the scope of this memo.
The solution to HMOs being denied their Right of Recovery is discussed in the following description of a new business model and subscriber contract.
Federally mandated burdens on non-profit hospitals such as St. Joseph’s forced affordable and high quality health systems to sell out to HMO’s.
When St. Joseph’s, a New Mexico non-profit, sold out to former principles of HCA/Columbia, I visited the nun in charge of Catholic Charities, benefactor of the proceeds of that sale. She told me St. Joseph’s non-profit model lost money from year-to-year under ever increasing burdens of indigent care. She felt that a for-profit model was better suited to rapidly rising costs. ‘Indigents’ include ER abuses by illegal aliens. Hospitals with ERs were forced to give free healthcare to illegal aliens and indigents in general by the 1986 Emergency Medical Treatment and Labor Act.
Regulation of HMOs and Automobile Liability Insurers under state charters should have protected our hospital systems.
The original legislative intent of mandatory auto insurance (Mandatory Financial Responsibility Act, NMSA §66-5-221(E)(1)(1983)(repealed effective July 1, 1998) was revised to the point that an environment of reduced settlements was created; only the trial attorneys and the auto insurance companies benefited.
Under the atmosphere of reduced settlements, the injured party is unable to be made whole. The New Mexico courts have described personal injury claims with automobile insurance companies as purely adversarial, no longer favoring the injured citizen. The result is litigation for average claims are rare. The HMOs are forced to absorb the costs of reduced settlements and limited subrogation.
The Media and Politicians Unfairly Demonize HMOs
It is monumental error, if not an outright politically motivated lie, when the media and politicians demonize the HMO system when it is the HMOs and their subscribers who are picking up the tab for reduced auto insurance settlements.
Before the legal analysis of how the auto insurance companies diverted their state required coverage of medical costs to the HMOs, let me suggest one simple concept: if we had more doctors, our healthcare would be more abundant and less expensive. It is simply the Law of Supply and Demand.
Here is a quote from attorney, nationally syndicated pundit Larry Elder.
Why, in a society of nearly 260 million Americans, are there only 500,000 doctors? We have twice that many lawyers. Well, it seems that the American Medical Association, with the support of overzealous state lawmakers, have [sic] artificially and intentionally limited the number of doctors produced by medical Schools. For every med school applicant who gets in, many qualified applicants get turned down.
The Ten Things You Can’t Say in America, Larry Elder, The Big Lie: Our Health Care Crisis, pg 172, St. Martin’s Press (2000)
The Damage to HMOs is Rampant and Nationwide
In the state of Nevada, there is an ongoing Federal investigation of doctors and lawyers conspiring to pad medical expenses in order to create ‘kickbacks’ within the settlement process.
In another state, a Wal-Mart employee received a $700K settlement for injuries, but the personal injury lawyers never contacted the Wal-Mart HMO. The lawyers got their $400,000, but because of apparent attorney malfeasance the $470,000 in medical costs to the Wal-Mart HMO were not recoverable equitably through Right of Subrogation.
Such settlements represent a tempting windfall. The American Benefits Council and America’s Health Insurance Plans, a health-insurer lobby, estimate health plans recoup about $1 billion a year in medical claims from accident settlements and other third parties. A cottage industry of auditing firms, benefit-recovery specialists, and subrogation lawyers help them. They estimate that only 1% to 3% of health-care spending is potentially recoverable from such claims. “In the past, employers used to think of this as and afterthought,” says Tom Lawrence, the chief executive of Benefit Recover, a Memphis, Tenn., company whose clients include Southwest Airlines and hospital chain HCA.
How to Reverse the Damage Done
The personal injury tort settlement process has become abusive and in violation of the original intent of state statute. The process has devolved to favor the unjust enrichment of attorneys and liability insurers at the expense of the injured party and hospital systems.
Injured parties report that the settlement process can be more traumatic than the actual accident.
As cited in this memo’s footnotes, the New Mexico legislative history suggests that targeted litigation and lobbyist subterfuge on a national level modified the law to favor the automobile insurers. The intended purpose of automobile insurance to protect the injured citizen, once absolute, was surreptitiously revised in legislative session so that the intended protection is now gone, or at least undermined to the extent that suggests the cure recommended in this memo.
In addition to creating a purely adversarial contest between once legislatively protected citizens and the auto insurers, the cause of action of Unfair Claims Practices Act, specifically the practice of forcing litigation to achieve in court what should have been a traditional settlement within policy limits, has essentially denied recovery to third-parties who have legal standing under the concept of privity of state mandated insurance benefits following the effected entity.
The recent denial of joinder of Unfair Claims Practices is arguably a prima facie denial of a constitutional right of the injured party to face the adversarial party with all causes of action within the jurisdiction of the court. The relationship of privity and res judicata beg the question of related issues in successive diversity actions.
Tort Recovery to the Hospital, not the Attorney
An HMO with a quarter million members is much more powerful than a local personal injury law office. In fact, a hospital or health system is much better suited to represent the injured party against huge liability insurance companies because medical records and expert witnesses are readily available for the patient.
Under contractual ‘duty to defend,’ the automobile liability insurer has complete control over the settlement process. If your car is damaged by a tortfeasor, the damages are collected from the one responsible for the accident to a degree that the insurer suffers as little loss as possible. How can they complain if the HMOs do something similar?
This memo suggests it can be done, and done protecting the interests of their insured as plaintiffs more effectively than auto insurers achieve defending their insured.
A New HMO Contract Offering Hospital Joint Representation
To avoid conflicts of interest, or appearances of tying-in, the patient HMO policy would offer a choice between a ‘boutique’ personal injury attorney ‘flipping’ cases for 33.3%, or the HMO’s own legal department representing the interests of both parties. Equitable division of settlements would be achieved within a system of ratios based on seriousness of the injury and other losses.
A schedule of multipliers times medical costs to determine Pain & Suffering means the insured’s interests would not be diluted by the medical cost recovery. As described in the following, both the injured party’s award and hospital’s medical cost recoveries would be equally affected by any reduced settlements and/or insufficient liability limits of the liability insurer.
Conflict of Interest is Inherent in the Trial Attorney Relationship
In the case of the personal injury firm, the cost:benefit ratio of settling versus litigation is indelibly embedded with conflict of interest. The liability insurer can drag its feet for years in an attempt to force a settlement in lieu of litigation. Especially with the elimination of punitive damages now that the Bad Faith and Unfair Claims Practices claims are denied joinder, the risk of litigation far outweighs the benefits to the personal injury attorney who now strongly encourages settlement as a business practice.
Current contingency fees of an additional 6.67% (33.3% vs. 40%) if the case is litigated do not justify the time, risk, and expense. Without Unfair Claims Practices, the personal injury attorney can no longer request additional punitive damages.
On the other hand, a hospital or health system staffed with legal professionals specializing in personal injury and benefit recovery is a fixed cost relative to its productivity. The ability of the hospital to maintain the staff, plus outsource legitimate post-accident care for physical therapy, maintain the evidentiary record, and provide currently ignored post-trauma counseling are all legitimate services to the benefit of the patient’s health and legal concerns. The power of the HMO and the cumulative effect of medical costs over time will turn the delay tactics of the liability insurer against them.
Is There Enough Personal Injury to Justify HMO Legal Staffing?
In Albuquerque, New Mexico, there is one page of HMOs compared to seventy-five pages of personal injury attorneys. Coincidently, New Mexico also has the highest accidental casualty rate in the United States with as many as .28 fatalities per 1000 accidents, and with many more injured.
Crunching the Numbers
A 1990 National Highway Traffic Safety Administration (NHTSA) study reported found that about 28 percent of occupants in motor vehicle accidents incur minor to moderate injury while 6 percent incur severe to fatal injuries.
According to a report released back in 1993, the total costs for motor vehicle accidents in the US was over $333 billion in 1988.
According to the Insurance Research Council:
- 63 percent of injuries are paid by the injured individuals own automobile insurance company
- 55 percent of injuries are paid by the auto insurance company of another vehicle
- 36 percent of injuries are paid by health insurance
- 20 percent of injuries are paid by government programs
- 19 percent of injuries are paid workers’ compensation insurance
Almost 60 percent of those injured reported to have used 2 or more sources of payment.
Let us say $150 billion of automobile accident costs annually are medical. If 36% of those costs are paid by health insurance, that is $50 billion, or $10 billion annually per state. That breaks down, roughly, to $2000 annually for every man, woman, and child . . . adding $200/month to healthcare per person directly from automobile accidents.
This ‘pencil and paper’ calculation is very rough, but illustrates that the auto insurance liability effect on health insurance is very real, possibly doubling healthcare subscriptions.
Pundits decry Medical Malpractice awards as the problem, but there are 75 pages of personal injury attorneys in the Albuquerque, NM Yellow Pages . . . and only 38 attorneys listed who specialize in Medical Malpractice.
The Role of Private Enterprise
Even though it is a legitimate state interest to protect the health and welfare of its citizens, the governor’s office and the Public Regulation Commission (PRC) have failed to defend the original intent of the law in the face of adversarial litigation and lobbying favoring the chartered liability insurer.
The argument herein is that a legal contract between two parties with concurrent claims under the same circumstances can circumvent the damage done in recent court decisions. Legal challenges or interference from the PRC would be defeated under the rights of the insured and ‘fairness.’ The HMOs have rights under both equity and contract.
Any concern of conflict of interest by joining the benefit recovery rights of the HMO to the tort claim of the injured party can be addressed in contract. The result will be the equitable distribution of recovery favoring first the injured party, instead of the unjust enrichment of the auto insurer and personal injury attorney.
Contract is very difficult to vitiate under judicial holdings alone, without violation of statute per se. One would also think trial attorneys would be reticent to cry ‘conflict of interest’ when public opinion and recent news is an indictment of their abuses.
A Sample Settlement
It is unconscionable that such an arrangement puts the financial interests of the HMO at odds with the tort recovery of their subscriber. Joining the HMO to the injured party tort action brings into question the equitable division of an award. A simple formula of multipliers based on the level of injury, perhaps enhanced by the level of extraordinary care and potential of future medical costs, would guarantee a level of recovery to the HMO based on first reaching the fullest possible award to the injured party.
For example . . .
An accident with $20,000 in medical costs involving hard tissue damages would entitle the injured party to a 3X to 5X recovery multiplier. This formula calculates one part for hospital costs, and the remainder for the patient’s losses plus pain & suffering.
In this case, if a 5x multiplier settlement of $100,000 is calculated, full recovery to the HMO and compensation to the injured party of $80,000 is achieved. If it is a case of liability limits or comparative liability settling for less than $100,000, then the HMO may not recover all costs, but proportional to the patient’s award.
The exact benefits of adopting a ‘duty to defend’ model is difficult to calculate. One can only be certain that the current 33.3% of the personal injury attorney and 40% reduction in settlements benefiting the automobile liability insurers will go directly to the HMO, the injured party, and HMO subscribers.
By: Leonard A. Daneman © 2006
 “[A]n insurance policy procured by force of legislative enactment inures to the benefit of any injured member of the public.” Raskob v. Sanchez and Allstate Insurance Company, 126 N.M. 394 (1998), (Cf. NMSA 1978 § 66-5-221(E) made the liability of the insurance carrier to the injured public member “absolute” (‘absolute’ defined as conclusive and not liable to revision). However, the HB 265 repeal by N.M. Rep. Larranaga did, in effect, ‘revise’ the MFRA. 43rd Legislature, State of New Mexico, 2nd Session, per Journal of House of Representatives and NMSA 1978, Vol 12 § 66-5-221 (repealed). I confirmed this event with one of the four legislators who voted against this revision, State Rep. Rick Miera. His reasoning for voting ‘NO’ reflected the following; Breeden vs. Wilson, 58 N.M. 517, 524, 273 P.2d 376, 380 (1954) “[T]he only possible legislative authority to pass such acts or purpose for passing such acts is the protection of the public.”
 NMSA 1978, § 59A-16-20 (1984), as amended through 1997) ”Any and all of the following practices with respect to claims, by an insurer or other person, knowingly committed or performed with such frequency as to indicate a general business practice, are defined as unfair and deceptive practices and are prohibited: E. not attempting in good faith to effectuate prompt, fair and equitable settlements of an insured’s claims in which liability has become reasonably clear; . . .”
 Hovet v. Allstate Ins. Co., 66 P3d 962 (Ct. App. 2003), C.f Raskob v. Allstate Ins. Co., 1998-NMSC-045
 Lowell Staats Mining Co. v. Philadelphia Electric Co., 878 F.2d 1271 (10th Cir. 1989), clarifies and expands the St. Louis Baptist discussion. “Privity has been held to exist in the following relationships: concurrent relationship to the same property right (i.e. trustee and beneficiary); successive relationship to the same property or right (i.e. seller or buyer); or representation of the interests of the same person.”
 Deflon v. Sawyers, 2006-NMSC-025
 Dimick v. Lewis, 127 N.H. 141, 497 A.2d 1221 (1985), “[I]n which we articulated a formula for allocating the proceeds of a ‘reduced recovery’ settlement to the injured minor and to the medical insurer as subrogee of the minor’s parent.”
 Gutierrez v. City of Albuquerque, 125 NM 643 (N.M.), 1999-NMSC-027