Criminal Prosecution for HMO Treatment Denial

When people deliberately do things that are almost certain to cause death, and someone then dies, prosecutions for homicide are normally appropriate. However, the administrative conduct of HMOs seems to be an exception. Unwarranted delays and denials of medical treatment are not prosecuted even in cases where the HMO's responsible personnel must have foreseen that their actions would probably lead to death or grievous harm. This article considers the basis for this exception, analyzing the existing criminal law of "omissions" and surrounding policy considerations. HMOs are subject to powerful market incentives. In the eyes of a rational HMO executive, the company's clientele can be divided into two groups, the "net-positive" and the "net-negative" subscribers. The net-positives are the people who will probably pay more in future premiums than they will cost the HMO in future medical services. The net-negative group contains those who will probably cost the HMO more in future medical services than they will ever pay in future premiums (e.g., the seriously and chronically ill). From the HMO's economic perspective, any money spent to extend the lives of net-negative patients is merely prolonging an already losing proposition. Most large HMOs are traded on national stock exchanges and their financial results are closely scrutinized by securities analysts and others. This public market activity means HMO executives are under steady pressure to keep medical costs down and profits up. At the same time, individual medical decisions are necessarily discretionary and never exact. Therefore, a quiet and low-key bias against treatment authorizations to net-negative subscribers might be relatively hard to detect but potentially very lucrative. Given the normal economic incentives, it is no surprise that older and chronically ill people (the "net-negatives") do much worse under HMOs than under traditional insurance plans. One study found, for example, that elderly, chronically ill patients in HMOs "were nearly twice as likely to decline in physical health over time" as those with traditional medical insurance. To state the problem bluntly, there is a potentially lethal economic flaw in the HMO concept. The market does not reward HMO executives for saving lives at stockholder expense. Criminal sanctions may work better than civil damages to motivate HMOs to authorize the medical treatments their subscribers are contractually entitled to. Whereas the burden of civil damage awards can be shifted, in the form of higher premiums and reduced medical expenditures, the criminal sanction of imprisonment cannot. The only way to prevent HMOs from shifting the penalties of wrongful denials back to subscribers and patients may be to impose a cost that the HMO's personnel cannot shift. This is, of course, the classic function of the criminal law--to impose costs on bad behavior that harm-doers cannot shift. Unlike civil damage actions, moreover, criminal prosecutions are already permitted by ERISA. Under the prevailing categories and definitions of the criminal law, prosecutions for wrongful HMO treatment denials would seem a straightforward application of the principle that, when death is foreseeable, lethal behavior is a crime.