¹ For a full explanation of capitation, see Miller, Frances H., Foreword: The Promise and Problems of Capitation, 22 AM. J.L. & MED. 167 (1996)Google Scholar; see also Gardner, Jerome R. & Maroney, Roxy, Positioning for Capitation by Redesigning Internal Processes, Healthcare Fin. Mgmt., July 1, 1995, at 40Google ScholarPubMed. Capitation is one of the three forms of base pay used by health maintenance organizations (HMOs), the other two being salary and fee-for-service (FFS). See Hall, Mark A., Rationing Health Care at the Bedside, 69 N.Y.U. L. Rev. 693, 772 (1994)Google ScholarPubMed. Most commonly, capitation refers to reimbursement arrangements whereby a provider meets all a patient’s needs for a pre-arranged fixed fee. See id. at 722 n.289.

² The state of Washington recently enacted legislation to capitate the health care received by every person in the state by July 1999, and the spread of capitation through California is equally pervasive. Pacific Physician Services, Inc., Wall St. Transcript, Jan. 16, 1995Google Scholar, available in Westlaw, 1995 WL 2542706. At present, “[m]ore than half of Californians are in HMOs, the highest percentage of any state in the country.” Barnum, Alex, State Agency Flexes Its Muscles: New Leader Tough on Health Care, S.F. Chron., May 21, 1994, at D1Google Scholar. On the national level, 51 million Americans receive their medical care through HMOs. 20/20: The Ultimate Cost 4 (ABC News television broadcast, trans. #1609, Mar. 1, 1996) [hereinafter 20/20: The Ultimate Cost]. There was a 23% increase in the number of employees in managed care plans between 1992 and 1995, with a significant discrepancy between the health care offered executives and other employees under those plans. See Myerson, Allen R., Executives Are Cradled While Medical Benefits Are Cut for Rank and File, N.Y. Times, Mar. 17, 1996, § 3, at 1Google Scholar, 13.

³ See Kadera, Jim, Dr. William J. “Bill" Pyrch, Oregonian (Portland), Jan. 12, 1995, at 4Google Scholar.

⁴ Though managed care has been around for decades, its widespread popularity is new. Ross Perot, Intensive Care 163 (1995) (“It is too early to determine whether the advantages of managed care outweigh the disadvantages, or vice-versa.”); see also Orentlicher, David, Health Care Reform and the Patient- Physician Relationship, 5 Health Matrix 141, 164-66 (1995)Google ScholarPubMed (citing study to assess the 1984 Medicare switch to capitated care, the results of which were somewhat inconclusive).

⁵ "Currently, approximately 80 percent of the insured population is influenced in some way by managed care, as is more than 50 percent of drug market volume. . . . Some projections suggest that 90 percent of the drug market will be* under the influence of managed care by the year 2000.” Boston Consulting Group, The Changing Environment for U.S. Pharmaceuticals 18 (Apr. 1993) [hereinafter Changing Environment]. “Over the nation as a whole, almost 50m people are under managed care, and their number is growing by 11% a year. In western Massachusetts and California, half or more of the insured population is already under managed care.” Science and Technology, Health Policy: Managing to Care, Economist, Sept. 23, 1995, at 70Google Scholar [hereinafter Managing to Care]. In fact, states are overhauling their Medicaid programs to include managed care, even though doing so requires a waiver from the federal Health Care Finance Administration (HCFA). As of early 1995, HCFA had approved waivers for Florida, Hawaii, Kentucky, Ohio, Oregon, Rhode Island, and Tennessee, and at least 15 other states were in the process of applying. Perot, supra note 4, at 154-55. For discussion of the waiver issue based on first-hand policymaking experience, see generally Astrue, Michael, Pseudoscience and the Law: The Case of the Oregon Medicaid Rationing Experiment, 9 Issues L. & Med. 375 (1994)Google ScholarPubMed.

⁶ Because realignment of the health care system is propelled by managed care organizations (MCOs), large parts of the hospital system are being taken over by for-profit, publicly held companies. See McLaughlin, Thomas, Health Care’s Third Revolution, Boston Bus. J., Oct. 20-26, 1995, at 31Google Scholar; see also Pham, Alex, Hospital Sale to For-Profit Firm Evokes Outrage, Boston Globe, Dec. 7, 1995, at 46Google Scholar (reporting that Attorney General is exercising oversight discretion over nonprofits to police the sale of a nonprofit health care provider to a for-profit company).

⁷ See Teisberg, Elizabeth O. et al., Making Competition in Health Care Work, Harv. Bus. Rev., July- Aug. 1994, at 131, 138Google ScholarPubMed; see also Malinowski, Michael J. & O'Rourke, Maureen A., A False Start?: The Impact of Federal Policy on the Genotechnology Industry, 13 Yale J. on Reg. 163, 235-38 (1996)Google Scholar.

⁸ Consensus among policymakers that we as a society have reached an era of cutbacks in health care financing is, to a large extent, driving the reformation of the health care industry. This consensus is reflected in the Clinton Administration’s managed competition plan unveiled in 1994 and in other proposals for health care reform, both Republican and Democrat, that have followed. See generally S. 1028, 104th Cong., 1st Sess. (1996) (Health Insurance Reform Act of 1995, introduced July 13, 1995 and sponsored by Sen. Kassebaum, R-Kan.); H.R. 3103, 104th Cong., 1st Sess. (1996); Himmelstein, David & Woolhandler, Steffie, The National Health Program Book (1994)Google Scholar (explaining that the current U.S. health care system is failing, and that most Americans want the United States to adopt a national health care program that costs less and insures everyone); Black, Chris, Health Insurance Revisited, Boston Globe, Mar. 12, 1996, at 1Google Scholar (discussing bill by Sen. Nancy Kassebaum, R-Kan., and other Republican initiatives); House GOP Reports Health Bill: Republicans Cite Agreement on Insurance Legislation, Boston Globe, Mar. 9, 1996, at 9Google Scholar (bill to extend health insurance to workers now being denied coverage).

⁹ HGP, which commenced in 1990, is an international effort to map the entire human genome by 2005. The Project annually receives more than $100 million from the federal government and engages approximately 350 laboratories worldwide. See Malinowski & O'Rourke, supra note 7, at 190-91; see also Cook-Deegan, Robert M., Origins of the Human Genome Project, 5 Risk: Health, Safety & Env. 100 (1994)Google Scholar. The first phase of the HGP already is complete, which should further accelerate progress. See Saltus, Richard, Scientists Finish DNA Map Project, Boston Globe, Mar. 14, 1996, at 12Google Scholar.

¹⁰ These products are reaching consumers both through and around the Food and Drug Administration (FDA). At the annual meeting of the Massachusetts Biotechnology Council (MBC) in March 1996, David Kessler, Commissioner of the FDA, credited FDA self-reforms with accelerating the review and approval of AIDS biotech drugs. See Rosenberg, Ronald, Kessler Defends FDA, Says US Quicker at Getting Drugs OK'd, Boston Globe, Mar. 12, 1996, at 34Google Scholar. OncorMed. Inc. of Gaithersburg, Maryland is already marketing a test for BRCA1, a genetic mutation of which has been linked to breast cancer. See Stephenson, Joan, Questions on Genetic Testing Services, 274 Jama 1661, 1661 (1995)CrossRefGoogle ScholarPubMed (addressing the commercialization of a test for BRCA1 mutations by OncorMed. Inc.); The First BRCA1 Test Hits the Market: Are Oncologists, Patients Ready?, Cancer Letter (P.O. Box 15189, Wash., D.C. 20003), Jan 26, 1996, at 1-5Google Scholar [hereinafter First BRCA1 Test], Moreover, it is doing so without FDA oversight, and Myriad Genetic Laboratories, Inc. is about to market another, as was announced at the Annual MBC biotech meeting on March 11, 1996 by Janet E. Haskell, the company’s president. These companies are relying on protocols and the input of institutional review boards to limit their liability and the fact that, at least arguably, existing FDA and clinical regulations do not reach genetic tests performed in-house by their developers. Id.; see also Stephenson, supra, at 1661- 62. But see Proposed Rules, Department of Health and Human Services, 61 Fed. Reg. 10,484 (Mar. 14, 1996) (proposal to, among other things, regulate the active ingredients used to perform in-house tests, including genetic tests).

¹¹ See generally Lee, Kenneth B. Jr. & Burrill, G. Steven, Biotech 96: Pursuing Sustainability (1995)Google Scholar (Ernst & Young’s tenth annual report on the biotech industry); Malinowski & O'Rourke, supra note 7, at 165-67, 169-80.

¹² See generally LEE & BURRILL, supra note 11; Malinowski & O'Rourke, supra note 7, at 165-67, 169- 80. Some of these new capabilities are already being commercialized and giving rise to ethical dilemmas and coverage disputes. See, e.g., Katskee v. Blue Cross/Blue Shield of Nebraska, 515 N.W.2d 645 (Neb. 1994) (concluding that genetic test result in conjunction with other factors was standard of care diagnosis); Stephenson, supra note 10, at 1661 (addressing the commercialization of a test for mutations of BRCA1 by OncorMed. Inc.); First BRCA1 Test, supra note 10, at 1-5. See generally infra part II.B.3.

¹³ Dr. Troyen A. Brennan thoughtfully addresses the role of ethics in shaping health policy in An Ethical Perspective on Health Care Insurance Reform, 19 Am. J.L. & Med. 37, 47-55 (1993)Google Scholar.

¹⁴ See Hall, supra note 1, at 727-28. Rev. Paris has discussed the identification of three eras in medical ethics—(1) from Hippocrates to 1960 (consensus among physicians), (2) 1960 to 1990 (disintegration of community-shared values), and (3) 1990 to the present (enactment of the Patient Self-Determination Act, 42 U.S.C. § 1395cc (1994)). See Paris, John J. et al., The “Medical Loss Ratio": The Determination of Medical Standards by the Marketplace, 15 J. Perinatology 407 (1995)Google ScholarPubMed [hereinafter Paris et al., Loss Ratio].

¹⁵ Hall, supra note 1, at 727-28; cf. Paul Starr, The Social Transformation of American Medicine 22 (1982)Google Scholar (“Standardization of training and licensing became the means for realizing both the search for authority and control of the market.”).

¹⁶ Hall, supra note 1, at 728.

¹⁷ See id. at 727. See generally Symposium, Hastings Center 25th Anniversary Issue, Hastings Center Rep., May-June 1994Google Scholar [hereinafter Hastings Center Symposium!].

¹⁸ Hall, supra note 1, at 728.

¹⁹ 42 U.S.C. § 1395cc (1994); see Paris et al., Loss Ratio, supra note 14, at 408.

²⁰ See generally Hastings Center Symposium, supra note 17.

²¹ See generally Paton, H.J., Immanuel Kant: Groundwork of The Metaphysic of Morals (1964)Google Scholar.

²² Hall, supra note 1, at 728.

²³ Id. at 728-29.

²⁴ Perot, supra note 4, at 107.

²⁵ Himmelstein & Woolhandler, supra note 8, at 19; see Perot, supra note 4, at 107.

²⁶ See generally Himmelstein & Woolhandler, supra note 8, at 19-49, 80-89 (illustrating the rising costs of health care and the uneven distribution of health care services); Perot, supra note 4.

²⁷ See Himmelstein & Woolhandler, supra note 8, at 80-89.

²⁸ A 77% approval rate has been reported for coverage of high-dose chemotherapy and bone marrow transplants. Peters, William P. & Rogers, Mark C. , Variation in Approval by Ins. Companies of Coverage for Autologous Bone Marrow Transplantation for Breast Cancer, 330 New Eng. J. M:ed. 473, 474 (1994)CrossRefGoogle Scholar. Nevertheless, there has been a great deal of nonpredictability and variation regarding coverage for this treatment. See Orentlicher, supra note 4, at 151-52; Denise S. Wolf, Comment, Who Should Pay for “Experimental" Treatments?: Breast Cancer Patients v. Their Insurers, 44 Am. U. L. Rev. 2029, 2030 (1995) (proposes that insurers disclose the criteria they use to assess whether innovative treatments are efficacious enough to be covered, and adopt procedures premised on objective criteria to promote goals of consistency, uniformity, and fairness).

²⁹ Legislation has been proposed on both the state and federal levels to require insurers to pay for minimum hospital stays. See, e.g., “Drive-Through" Baby Deliveries Bill Picks Up Steam, Congress Daily A.M., Mar. 29, 1996Google Scholar, available in 1996 WL 5515467.

³⁰ Himmelstein & Woolhandler, supra note 8, at 62-63.

³¹ Health-Care Gap Found in Children, Boston Globe, Nov. 9, 1995, at 3.

³² Schroeder, Steven A., The Medically Uninsured—Will They Always Be with Us?, 334 New Eng. J. Med. 1130, 1130 (1996)CrossRefGoogle ScholarPubMed; see also 142 Cong. Rec. S3827 (daily ed. Apr. 23, 1996) (“It is estimated that 43 million Americans went without insurance in 1995.”); Aaron, Henry J., The Problem That Won't Go Away, in The Problem That Won't go Away 7 (Aaron, Henry J. ed., 1996)Google Scholar (number of uninsured Americans totaled 41 million in 1994); Charo, R.A., Legal and Regulatory Issues Surrounding Carrier Testing, 36 Clin. OBGYN 568-97 (1993)Google ScholarPubMed (citing 31 million uninsured based on pre-1994 data); Ford, Bryan, The Uncertain Case for Market Pricing of Health Insurance, 74 B.U. L. Rev. 109, 109 (1994)Google Scholar (citing 33 million uninsured based on pre-1994 data). “Over the past decade the number of uninsured increased by 12 million, and more people are uninsured today than at any time since the passage of Medicare and Medicaid.” Himmelstein & Woolhandler, supra note 8, at 22. For anecdotes illustrating inequities in the distribution of health care resources, see Peters, Philip G. Jr., Health Care Rationing and Disability Rights, 70 aInd. L.J. 491, 491-92 (1995)Google ScholarPubMed; see also Himmelstein & Woolhandler, supra note 8, at 79 (“But while we ration care, we waste billions on unnecessary and even harmful surgery, x-rays, and other medical procedures for the well- insured.”). This tremendous number of uninsured reflects the fact that Medicaid eligibility is linked to receiving other federal benefits which many needy Americans, the vast majority of them working Americans, do not receive. Id. at 26 (“About two-thirds of the uninsured are employed workers and their families.”); Matthew Miller, Where It May Really Hurt, Time, Dec. 18, 1995, at 29, 30.

³³ Knox, Richard A., Cutbacks to Shift Health Costs to Workers, Boston Globe, Dec. 6, 1995, at 20Google Scholar [hereinafter Knox, Cutbacks]; see also Knox, Richard A., Congress’ Plan to Curtail Medicaid Could Swell Ranks of Uninsured, Boston Globe, Nov. 9, 1995, at 13Google Scholar (“The number of people without health coverage could soar over the next seven years to nearly 70 million, one in every four Americans, a bipartisan panel of health policy experts said yesterday.”).

³⁴ Perot, supra note 4, at 54. The 77% calculation was derived using the 11.6% figure and a figure of 15% for the percentage of federal funding attributable to health care in 1995. See id.

³⁵ Id. at 78-79 (citing 1995 Medicare Trustees Report).

³⁶ See Danzon, Patricia M. et al., Consolidation Is a Tonic for Health Care Providers, Nat'l L.J., Sept. 18, 1995, at B14, B15Google Scholar; Teisberg et al., supra note 7, at 131-41.

³⁷ Teisberg et al., supra note 7, at 133; Paris et al., Loss Ratio, supra note 14, at 408 (“[N]othing is too good for Granny—so long as Blue Cross pays.”).

³⁸ Teisberg et al., supra note 7, at 133. A personal observation is that, not uncommonly, health care consumers respond favorably to the nondisclosure of pricing and other cost information. Often they say, “My health plan was wonderful—I never even saw a bill."

³⁹ National Ass'n Of Ins. Comm'rs (NAIC), Model Regulation Service (July 1992)Google Scholar; see also Brody, Howard, The Place of Ethics in Health Care Reform: Framing the Health Reform Debate, Hastings Center Rep., May-June 1994, at 7, 7CrossRefGoogle Scholar (acknowledging that most people understand “the moral values at stake" including universal access and reasonable equality of benefits).

⁴⁰ Danzon et al., supra note 36, at B15; Teisberg et al., supra note 7, at 132-33.

⁴¹ Teisberg et al., supra note 7, at 134.

⁴² Perot, supra note 4, at 58 (stating that technology is increasing the quality of health care and enabling people to live longer, but it also is raising the cost and frequency of use of health care); Danzon et al., supra note 36, at B14. Consider that, “[a]t present, there are about 10,000 mammography machines in the U.S. Yet 2,000 could meet all current demand, and about 5,000 would be needed if all women got every recommended mammography test.” Himmelstein & Woolhandler, supra note 8, at 86. The higher costs that result from this wasteful expenditure on technology make mammography less affordable and volume testing impossible in some areas, thereby reducing the competency of operators and, consequently, the quality of testing. Id. The detriment to competency (and, of course, to quality of care) attributable to overuse and duplication of technology applies to countless other procedures, including complex surgical procedures. Id. at 84-86.

⁴³ Teisberg et al., supra note 7, at 131-41.

⁴⁴ Paris et al., Loss Ratio, supra note 14, at 409.

⁴⁵ See Danzon et al., supra note 36, at B14 (“The rising cost of health care and health insurance premiums, and the consequent increase in the share of total compensation spent on health benefits, has led payers—insurers, self-insured employers or government—to demand alternative arrangements that control costs.”).

⁴⁶ For general discussion of utilitarianism and deontological thought, see generally Frankena, William K., Ethics (2d ed. 1973)Google Scholar; Smart, J.J.C. & Williams, Bernard, Utilitarianism: for & Against (1985)Google Scholar. The need for a new physician ethic to address the end of unlimited coverage has been recognized elsewhere in legal scholarship. See, e.g., Hall, supra note 1, at 778 (“To guide us in implementing this new role for physicians, we stand in need of a new ethic that recognizes the existence of variable levels of funding.”); see also Peters, supra note 32, at 491.

⁴⁷ "The physician’s duty of loyalty to patients will be divided into a dual loyalty to patient and to society.” Orentlicher, supra note 4, at 149; see also Broome, John, Fairness Versus Doing the Most Good, Hastings Center Rep., July-Aug. 1994, at 36CrossRefGoogle ScholarPubMed (discussing Oregon plan and efforts to implement quality of life determinations).

⁴⁸ Note that the American Medical Association’s (AMA) Code of Medical Ethics now provides that:

Council on Ethical and Judicial Affairs, Am. Med. Ass'n, Code of Medical Ethics op. 2.09 (1994 ed.) (opinion updated June 1994) [hereinafter Code of Medical Ethics].

⁴⁹ Traditionally, the conflict between health care consumption and cost has been between the patient and his or her insurer, with doctors generally acting as patient-advocates and effectively making their patients’ cases. Managed care actually is inverting incentives to consume—replacing incentives to do too much with incentives to do too little.

Danzon et al., supra note 36, at B14; see also Starr, supra note 15, at 16 (“The growth of science might have reduced professional autonomy by making doctors dependent upon organizations!,]" for modern medicine requires access to hospitals with huge capital financing). As explained by Professor Starr, “[a]s independent entrepreneurs, doctors are unlikely to be sensitive to any organizational interest in conserving resources. Hence, for the same reasons that firms incorporated independent artisans, the insurance companies and hospitals had clear incentives to seek control over physicians.” Id. at 26.

⁵⁰ Teisberg et al., supra note 7, at 132; see Collins, Michael, A Doctor Ponders the Issue of Money- Making Medicine, Boston Bus. J., Feb. 16-22, 1996, at 25Google Scholar (“Simply stated: For profit incentives do not and cannot put patients and their communities first.”); see also Danzon et al., supra note 36, at B14 (“The growth of managed care reflects demands by payers for providers to be accountable for cost and quality as a condition of payment. For providers, this means pressures and incentives to conserve, which imply declining use.”); Sage, William M. & Jorling, James M., A World that Won't Stand Still: Enterprise Liability by Private Contract, 43 Depaul L. Rev. 1007, 1018 (1994)Google Scholar (“As managed care organizations blend the financing of health insurance with the delivery of health care services, . . . coverage decisions are increasingly likely to have direct clinical consequences.”).

⁵¹ Care managers attain direct control through payer strategies that include: (1) prior approval requirements; (2) concurrent review of hospital stays; (3) protocols outlining approved treatment plans for particular conditions; and (4) pharmaceutical formularies (preferred list of prescription drugs) identifying drugs eligible for reimbursement. Danzon et al., supra note 36, at B14; Freudenheim, Milt, The New Drug-Price Squeeze, N.Y. Times, Mar. 13, 1996, at D1Google Scholar (addressing how MCOs are exercising buying power and categorically refusing to purchase drugs from pharmaceutical companies, including Merck & Company—the nation’s biggest drug maker).

⁵² Bonus systems are structured in many ways. For example, it is common under managed care plans for managers to withhold a fixed percentage of physician compensation until the end of the year to cover shortfalls in funds budgeted for expenditures on patient care. If there is no shortfall, the funds go back to the physicians. Orentlicher, supra note 4, at 157-58. Also, these systems combine bonuses with fines. See infra text accompanying notes 134-35.

⁵³ Bass, Alison, Focusing on Managed Care, Boston Globe, Dec. 21, 1995, at 32Google Scholar [hereinafter Bass, Focusing]; Danzon et al., supra note 36, at B14 (“When the provider of a health plan is paid a fixed amount per case or per patient, ordering extra services or tests entails additional costs but earns no additional revenue.”).

⁵⁴ Danzon et al., supra note 36, at B15.

⁵⁵ Institutional decision-making even just at the level of MCOs could prove substantial if the consolidation trend attributable to managed care continues and antitrust laws are not enforced to limit consolidation. The overall economic objective of care managers is “to consolidate and realize economies of scale and scope through shared overhead facilities including information systems, expensive capital equipment and personnel.” Id. at B14, B15.

⁵⁶ As discussed infra part IV, the perception of legal liability can shape behavior, and it should be allocated and utilized to create incentives for quality care. Nevertheless, the burden cannot be placed on those given inadequate care and their families to police the health care system through the courts.

⁵⁷ Starr, supra note 15, at 5.

⁵⁸ Examples include the gag clause legislation recently enacted by the Massachusetts Legislature (see infra note 136 and accompanying text) and the drive-through delivery regulations addressed supra note 29. In other words, one result of this assumption of control by MCOs, coupled with consolidation in the health care industry, is a shift from health care decision-making on a patient-by-patient basis to organizational decision-making. See Danzon et al., supra note 36, at B14-B15 (addressing impact of consolidation on providers, patients, and the overall quality of health care). It follows that, with the spread of managed care, more individual patient care issues will be addressed as a matter of community health policy, and costs will be a prime consideration.

⁵⁹ Hall, supra note 1, at 703-05. Federal legislative policy has been influenced greatly by the cost-is- no-consideration dominant ethics view. See id. at 705-07 (discussing legislative efforts to control the use of financial incentives in health care management); see, e.g., Ethics in Patient Referrals Act, 42 U.S.C. § 1395nn (1994), discussed in, Stark I Final Regulations: Implications for Health Care Providers and Suppliers, Health Law., Aug. 1995, at 3Google Scholar (broad prohibition against financial compensation for referrals, also known as Stark I). But see Code of Medical Ethics, supra note 48, at op. 2.09 (while concern for the quality of care should be their first consideration, physicians should be conscious of costs).

⁶⁰ See Levinsky, Norman G., The Doctor’s Master, 311 New Eng. J. Med. 1573, 1574-75 (1984)CrossRefGoogle ScholarPubMed; see also Furrow, Barry R., The Ethics of Cost-Containment: Bureaucratic Medicine and the Doctor as Patient- Advocate, 3 Notre Dame J.L. Ethics & Pub. Pol'y 187, 217-25 (1988)Google ScholarPubMed.

⁶¹ Hall, supra note 1, at 771.

⁶² See Himmelstein & Woolhandler, supra note 8, at 79; see also supra note 23 and accompanying text. As discussed infra note 108, there also is no cost-effectiveness requirement in the U.S. drug approval process. See Malinowski & O'Rourke, supra note 7, at 236-37.

⁶³ Hall, supra note 1, at 777 (“[M]edical ethics should not force patients to purchase a more expensive brand of morality than they can in fact afford.”). Similarly, Professor Hall has stated:

Id. at 732.

⁶⁴ "Oregon became the first state to attempt explicit rule-based rationing when it ranked over 600 condition-treatment pairings—e.g. surgery for appendicitis—according to medical effectiveness for purposes of allocating limited Medicaid funding.” Id. at 701-02 (fully discussing legal barriers to Oregon’s efforts). To obtain a waiver from the federal government necessary for Oregon to introduce its reforms, the state had to eliminate quality-of-life data from its formal methodology. The federal government alleged that such classifications violated the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12112-12113 (1994); see Hall, supra note 1, at 701-02. For materials on cost-benefit and quality-of-life analysis in the health care context, including a presentation on the Oregon experience by Michael Garland, D.Sc, see generally Cost- Benefit/Cost-Effectiveness Analyses in Genetics: What Can be Done? What Should be Done? A Forum for Discussion of Emerging Genetic Technologies (Mar. 30, 1996) [hereinafter Cost-Benefit/Cost-Effectiveness] (written materials compiled and distributed by the New England Regional Genetics Group).

⁶⁵ See supra note 32.

⁶⁶ Hall, supra note 1, at 770 (“Physician rationing addresses a quintessential agency cost problem—the abuse that results when physicians have unconstrained authority over medical spending decisions under open-ended insurance programs.”); see also Daniels, Norman, Meeting the Challenges of Justice & Rationing, Hastings Center Rep., July-Aug. 1994, at 27CrossRefGoogle Scholar. For analysis of the ethical implications of rationing health care, see Baily, Mary Ann, The Democracy Problem, Hastings Center Rep., July-Aug. 1994, at 39CrossRefGoogle ScholarPubMed; Broome, supra note 47, at 36 (discussing Oregon plan and efforts to place values on life); Kamm, Frances M., To Whom?, Hastings Center Rep., July-Aug. 1994, at 29CrossRefGoogle Scholar; Rakowski, Eric, The Aggregation Problem, Hastings Center Rep., July-Aug. 1994, at 33CrossRefGoogle ScholarPubMed.

⁶⁷ Hall, supra note 1, at 713.

⁶⁸ Id. at 738. Critics of the British system point out, however, that the incentive to conserve imbedded in British doctors has limited care. See, e.g., Griffin, Glen C., MD/DO Jobs and Incomes May Shrink but There’s Good News: CLIA Office Lab Regs May Go!, 97 Postgraduate Med., May 1, 1995, at 13Google ScholarPubMed.

⁶⁹ See Hall, supra note 1, at 712.

⁷⁰ See Teisberg et al., supra note 7, at 134.

⁷¹ Hall, supra note 1, at 712 (quoting economist Lester Thurow for the proposition that, rather than allowing sharp departures from prevailing norms, bedside rationing “will simply permit evolution of those norms”).

⁷² Id. at 776-80 (call for the development of a new ethical framework that incorporates physician rationing).

⁷³ Id. at 702 (footnotes omitted).

⁷⁴ Rev. Paris, John J. & Murphy, James J., The Medical Leadership Forum, Challenges for Medical Leaders: A Series on Key Issues. When The Doctor Says no: The Ethical Dilemma 7 (1995)Google Scholar (quoting The Art in The Hippocratic Corpus).

⁷⁵ BOSTON CONSULTING GROUP, The Contribution of Pharmaceutical Companies: What’s at Stake for America 3 (Sept. 1993)Google Scholar [hereinafter Contribution of Pharmaceutical]. Pharmaceuticals have provided the cure or the means of prevention of six of the top eight categories of killer diseases of the 1920s: influenza and pneumonia; tuberculosis; nephritis and renal sclerosis; gastritis, duodenitis, enteritis, and colitis; syphilis; diphtheria; whooping cough; and measles. Id. at 4, 7.

⁷⁶ According to Joseph Newhouse, a health policy and management professor at Harvard University, new technology is the real driver of health costs. Id. at 49. The Boston Consulting Group, based on an empirical study published in 1993, concluded that:

Id. at 48; see supra note 42 and accompanying text.

⁷⁷ Contribution of Pharmaceutical, supra note 75, at 50. The specialized nature of much modern medicine bears directly on its costs, for in a free market system specialists—without market substitutes and with high demands on their time—are able to charge higher fees. Id.

⁷⁸ Id. at 60. “Advances in medical knowledge have made it possible to control many diseases and thus significantly extend life and improve its quality, but at a very high cost. Understandably, the diseases that were targeted initially were less complicated (e.g., infectious diseases).” Id.

⁷⁹ Id. at 52.

⁸⁰ Id. at 46. For example, the annual medical spending and indirect social costs for cardiovascular disease reached approximately $110 billion in 1993. Id.

⁸¹ Id. at 12. Medical technology is making Americans live longer and increasing substantially the aggregate costs of their care:

⁸² Contribution of Pharmaceutical, supra note 75, at 11.

⁸³ Perot, supra note 4, at 59.

⁸⁴ See supra note 34 and accompanying text.

⁸⁵ Contribution of Pharmaceutical, supra note 75, at 52 (“Partly as a result of medical advances, society expects and often demands the right to medical care at any cost.”).

⁸⁶ ***Henk A.M.J. ten Have, Medical Technology Assessment and Ethics, Hastings Center Rep., Sept.-Oct. 1995, at 14, 16Google Scholar [hereinafter Medical Technology Assessment].

⁸⁷ Medical Technology Assessment, supra note 86, at 16; Tauer, Carol A., Human Growth Hormone: A Case Study in Treatment Priorities, Hastings Center Rep., May-June 1995, at S18CrossRefGoogle ScholarPubMed; White, Gladys B., Human Growth Hormone: The Dilemma of Expanded Use in Children, 3 Kennedy Inst. Ethics J. 401, 401-09 (1993)CrossRefGoogle ScholarPubMed; see also Levine, Joseph & Suzuki, David, The Secret of Life 161, 172 (1993)Google Scholar (addressing how genetic technology makes short-stature a treatable condition).

⁸⁸ There have actually been studies concluding that each inch of greater height may result in an in crease of income of $1,000 per year in 1993 dollars. Tauer, supra note 87, at S19.

⁸⁹ Id. at S19.

⁹⁰ See Sheehy, Gail, Northeast Living: When Time Runs Out on Fertility, Oregonian (Portland), Oct. 221, 1995, at L07Google Scholar (breaking success rates down by age groups).

⁹¹ Ubell, Earl, “If You're Trying to Have a Child. ...,” Parade Mag., Oct. 8, 1995, at 12Google Scholar.

⁹² See generally Malinowski & O'Rourke, supra note 7, at 174-77 (discussing gene therapy and diagnostic advances).

⁹³ Id. at 165 n.2, 171 (providing citations to other authority). Several drugs, including innovative AIDS drugs, were approved during the winter and spring of 1996, thereby raising the number of approved drugs to near forty.

⁹⁴ See id. at 176-77 n.17 and accompanying text. Scientists are unraveling the sequences of events that link genes and diseases; "Major diagnostic companies (Abbots, Boehringer Mannheim, Miles, Baxter, Beck- man, Becton Dickenson, Ciba-Geigy, Johnson & Johnson, Eastman Kodak, Bio Rad, etc.) are developing a variety of technologies by in-house invention and through alliances and acquisitions.” Silverman, Paul H., Commerce and Genetic Diagnostics, Hastings Center Rep., May-June 1995, at S15CrossRefGoogle ScholarPubMed.

⁹⁵ ***Weiss, Rick, Are We More Than the Sum of Our Genes?, Wash. Post, Oct. 3, 1995, § Health, at 11Google Scholar; see also Saltus, Richard, In an Effort to Map Human DNA, Scientists Find the Going Swift, Boston Globe, Dec. 22, 1995, at 23Google Scholar (stating that HGP is ahead of schedule and under budget). The explosion of knowledge in the field of genetics will produce a windfall of diagnostic and therapeutic technologies. “Genetic technologies are by no means a homogenous lot; they have varied medical and social effects, and are intended for diverse populations with distinct severity of illnesses, both actual and potential.” Public Priorities for Genetic Services, Hastings Center Rep., May-June 1995, at S1Google Scholar. “[A] plethora of population screens, diagnostic tests, and therapies will be available—perhaps commonplace—in the next decade. Conservative estimates are that some 50,000 gene markers will be developed as a result of molecular biology and translated into easy-to-employ biochemical assays, genetic tests, new drugs, and genetic therapies.” Boyle, Philip J., Shaping Priorities in Genetic Medicine, Hastings Center Rep., May-June 1995, at S2CrossRefGoogle ScholarPubMed. The future of bio technology is brightened by strong bipartisan support in Congress for biomedical research and favorable FDA reforms. See Iglehart, John K., Health Policy Report: Politics and Public Health, 334 New Eng. J. Med. 203, 203-07 (1996)CrossRefGoogle Scholar (discussing congressional support to increase biomedical research funding at a time when most federal health agencies face budget cuts); see infra note 100 (addressing FDA reforms favorable to biotechnology).

⁹⁶ "Gene therapy is creating the potential for dramatic cost reduction by restoring normal function in congenital diseases like cystic fibrosis and [adenosine deaminase] deficiency.” Teisberg et al., supra note 7, at 138. According to one study,

Changing Environment, supra note 5, at 52. But see Hanson, Mark J., The Seductive Sirens of Medical Progress: The Case of Xenotransplantation, Hastings Center Rep., Sept.-Oct. 1995, at 6Google ScholarPubMed (“The general irony of the cost-effectiveness argument is that because there will likely always be another cause of morbidity or mortality following the one medicine has prevented, there will always be a new investment opportunity for medicine.”).

⁹⁷ Consider that the mass screening program for cystic fibrosis, proposed in 1989 and preempted by NIH, would have created instantaneously a billion-dollar-a-year industry. Wilfond, Benjamin S., Screening Policy for Cystic Fibrosis: The Role of Evidence, Hastings Center Rep., May-June 1995, at S21-S22CrossRefGoogle ScholarPubMed.

⁹⁸ Silverman, supra note 94, at SI6.

⁹⁹ A case in point is Genzyme’s Ceredasae/Cerezyme, a treatment for Type 1 Gaucher’s disease. The treatment costs $150,000 a year initially, followed by a maintenance program of monthly infusions for the rest of the patient’s life at a cost of approximately $60,000 per year. Rosenberg, Ronald, Genzyme’s Plans to Beat Obsolescence, Boston Globe, Jan. 8, 1995, at 60Google Scholar; see also ***Gaucher’s Disease, Current Issues in Diagnosis and Treatment, 275 JAMA 548, 553 (1996)CrossRefGoogle Scholar (concluding that enzyme replacement therapy for Gaucher’s disease is limited by the cost of the agent, despite the treatment’s success).

¹⁰⁰ See Malinowski & O'Rourke, supra note 7, at 177-78. Reforms to the FDA review process will accelerate the delivery of many genetic technologies. See ***President Bill Clinton & Vice President Algore, Reinventing Regulation of Drugs and Medical Devices 28-31 (1995)Google Scholar; FDA Lays Out Plan to Reduce Delays, Costs in Approval Procedures, Boston Globe, Apr. 4, 1996, at 6Google Scholar; Schwartz, John, FDA Revises Biotechnology Rules, Boston Globe, Nov. 13, 1995, at A19Google Scholar (reforms include a reduction in the number of applications that must be filed).

¹⁰¹ Genetic tests generally are highly susceptible to misinterpretation due to environmental factors and the intricacies of human genetics, and task forces formed by both the Institutes of Medicine (IOM) and HGP have issued warnings about the commercialization of genetic testing. See generally Assessing Genetic RisksGoogle Scholar (Andrews, Lori B. et al. eds., 1994)Google Scholar (recommending national policy oversight of genetic testing, screening, and counseling); Interim Principles, Task Force on Genetic Testing (Mar. 1996) (ELSI task force draft); Boyle, supra note 95, at S2 (“[W]e tend to hold unrealistic expectations about the accuracy and certainty of genetic information.”); Stephenson, supra note 10, at 1661 (addressing the commercialization of a test for mutations of BRCA1 by OncorMed. Inc.); BRCA1 Mutation Finding Draws Attention to Potential Perils of Genetic Testing, Cancer Letter (P.O. Box 15189, Wash., D.C., 20003), Oct. 6, 1995, at 3 (study showed physicians, the group most likely to order initial genetic tests, appear to have only a cursory under standing of genetics) [hereinafter Potential Perils of Genetic Testing]; First BRCA1 Test, supra note 10, at 1-5; Richard Saltus, Plan to Market Tests for Cancer Gene Is Hit, Boston Globe, Mar. 10, 1994, at 3. The reliability of the majority of genetic tests is questionable because, beyond the lack of precise knowledge regarding the impact of environmental factors on most genetic predispositions, many health conditions are polygenic or multifactorial—meaning that they are influenced by multiple genetic factors. See Malinowski, Michael J.,Coming into Being: Law, Ethics, and the Practice of Prenatal Genetic Screening, 45 Hastings L.J. 1435, 1440 & n.14 (1994)Google ScholarPubMed. Simply stated, the identified genetic links to diseases are often unreliable for predicting the biological destiny of individuals. For example, although there is a strong correlation between BRCA1 (and BRCA2) mutations and breast and ovarian cancer, perhaps as high as 90% in some women, scientists do not know what to tell women with the mutations whose family histories contain no traces of the disease. Potential Perils of Genetic Testing, supra, at 5; see also Koenig, Barbara, Gene Tests: What You Know Can Hurt You, N.Y. TIMES, Apr. 6, 1996, at 23Google Scholar (explaining that knowing your genetic makeup can create profound emotional and financial problems). Also, “many people who have inherited the genetic glitch that causes Gaucher’s disease—a potentially fatal metabolic disorder—have no apparent symptoms[,]" Weiss, supra note 95, at 11, and “nearly 20 percent of persons who carry the gene for fragile-X, the most common form of inherited mental retardation (affecting one in every 2,500 live births), will never express any form of mental retardation.” Boyle, supra note 95, at S2.

¹⁰² See Koenig, supra note 101, at 23; Richard Saltus, Genetic Clairvoyance, Boston Globe Mag., Jan. 8, 1995, at 15 (reporting that patients are “justifiably worried that health or life insurers or employers will discriminate against them if genetic test results become known) [hereinafter Saltus, Genetic Clairvoyance]. See generally Malinowski & O'Rourke, supra note 7, at 241-42 nn.422-23 (providing other citations). Though plentiful and multiplying rapidly, the human health benefits and cost-effectiveness of many genetic diagnostic capabilities are, at present, somewhat questionable:

Skolnick, Malcolm et al., The BRCA1 Gene: Commercialization vs. the Public Interest, Health L: News (Univ. of Hous. Health L. & Pol'y Inst.), Fall 1994, at 2Google Scholar. This problem could be exacerbated by the availability of so-called Ides of March tests—tests to identify very general indicators of susceptibility to diseases of aging which may be relied on by insurance companies as indicators of life expectancy. Jerry E. Bishop, A Gene Gives a Hint of How Long a Person Might Hope to Live, Wall. St. J., Oct. 19, 1995, at Al, A14 (Apo E test). However, according to the insurance industry, if consumers are allowed increased access to genetic screening and the results are inaccessible to industry, consumers will reveal test results to lower insurance costs and conceal them to obtain insurance at standard rates despite genetic predispositions. See C. Lee, Creating a Genetic Underclass: The Potential for Genetic Discrimination by the Health Insurance Industry, 13 Pace L. Rev. 189, 207-10 (1993).

¹⁰³ Potential Perils of Genetic Testing, supra note 101, at 3. One survey found 91% of women who had a mother, sister, or daughter with breast cancer would want to be tested for susceptibility. Id.; see also Richard Saltus, Survey of Labs, New Tests Concern Genetics Specialists, Boston Globe, Oct. 28, 1995, at 14 (reporting that commercial and academic labs are moving quickly to offer gene tests predicting future health risks such as breast cancer).

¹⁰⁴ The importance of counseling is evidenced by the unanticipated and intense reactions of patients tested for Huntington’s disease. See Saltus, Genetic Clairvoyance, supra note 102, at 15; see also LEVINE & SUZUKI, supra note 87, at 200 (tension between mother and son over mother’s refusal to undergo genetic testing); Silverman, supra note 94, at S17 (“The ability to predict late-onset diseases, both common (for example, cancer) and unusual (for example, Huntington’s) conditions can result in dramatic changes in life style.”); Murray, Mary , Nancy Wexler’s Test, N.Y. Times, Feb. 13, 1994, § 6Google Scholar (Magazine), at 28 (chronicling Dr. Wexlerls contribution to the discovery of the gene responsible for Huntington’s; the impact of diagnostic capability on patients, including depression from negative results due to life decisions made previously; and her own decision not to be tested); Saltus, Richard, Breast Cancer Testing: Do You Want to Know?, Boston Globe, Mar. 11, 1996, at 25-27Google Scholar (addressing the unreliable validity of the test for most of the public and related issues);Saltus, Richard, Early Alzheimer’s: Do You Want to Know?, Boston Globe, July 3, 1995, at 39, 42Google Scholar. The impact of genetic information on patients is unknown, both in cases where an outcome is uncertain as well as in cases where an unbeatable condition is confirmed. As warned by the National Advisory Council for the Human Genome Project, “many questions remain unresolved, including whether a person is better off knowing about a future risk if medicine can do little to prevent the disease, and how to avoid genetic discrimination.” National Advisory Council for Human Genome Research, Statement on Use of DNA Testing for Presymptomatic Identification of Cancer Risk, 271 Jama 785, 785 (1994).CrossRefGoogle Scholar

¹⁰⁵ See generally Malinowski, supra note 101, at 1435 (supporting proposition that there should be no prenatal genetic testing without genetic counseling performed by someone adequately trained in social sciences).

¹⁰⁶ Unfortunately, the bioethics era embodies what at times appears to be a blind presumption that providers should give patients any and all information available regarding their health. In other words, providers give patients access to diagnostic and other predictive capabilities based on the principle that patients are entitled to information regarding their health and must be empowered to make their own choices. In many instances, this approach assumes too much knowledge and belittles the significance of medical training. Moreover, because of the costs of extensive counseling and shortsightedness, providers too often do not give patients the supplemental information needed to process the predictive information’ and to make sound choices they can live with—including the decision to undergo genetic testing in the first place. This is one of the most troubling hypocrisies of the bioethics era in medical ethics. Another is that, despite the complexity of modern medicine, patients have been empowered to make medically unsound decisions in complete contradiction with their health care providers, thereby shortchanging health care of professional standards and, at times, common sense and responsible allocation of resources. See generally Paris et al., Loss Ratio, supra note 14, at 410 (Leaving the choice to the patient “leads to a cultural dilemma: there is no room for professional standards and, if left unchecked, the process will soon lead to bankruptcy.”).

¹⁰⁷ See supra note 27 and accompanying text.

¹⁰⁸ Contribution of Pharmaceutical, supra note 75, at 67. An illustrative example of the problem is Genentech’s clot-busting drug known as t-PA or Activase, a drug prescribed for heart attack patients. See Malinowski & O'Rourke, supra note 7, at 240 n.419. Activase could save 10 more lives for every 1,000 heart attack patients treated than a preexisting market substitute, Streptokinase, which means 2,000 lives per year. Nevertheless, the cost for t-PA is $2,000 and up per patient, while Streptokinase costs just $200 per patient. See id.; Orentlicher, supra note 4, at 150 (“T-PA . . . may lower the risk of death by an additional 1% beyond the diminution in risk achieved by using streptokinase. Is this 1% increase in survival worth $2000 in additional costs?”); Doctors Face Ethical Dilemma Over Which Heart Drug to Use, Oregonian (Portland), Sept. 5, 1993, § Bus., at D4. Under the norms of the professional domination and bioethics eras of medical ethics, at least when applied strictly, withholding Activase is not an ethical option. Another example is colonoscopy:

Kadzielski, Mark et al., Peer Review and Practice Guidelines Under Health Care Reform, 16 WHITTIER L. REV. 157, 172(1995).Google Scholar

¹⁰⁹ See Medical Technology Assessment, supra note 86, at 13-14 (presenting arguments to bring ethical and moral considerations into technology assessment, rather than assessing technologies based on their technical merit and then addressing ethical implications after they are introduced into society).

¹¹⁰ The dependency of modern medicine on advanced and expensive technology is growing with the advent of new capabilities. For patients to realize the full benefits of modern medicine, their health care providers must be able to give them access to broad networks of specialists and advanced facilities. Starr, supra note 15, at 16; Sage & Jorling, supra note 50, at 1012 (“[T]he traditional doctor-patient relationship has been strained to accommodate the need for coordination and communication among providers, and for more informed and active decision-making by patients and their proxies.”). Communication and coordination among physicians is crucial for remaining apprised of the latest advances in medicine and to inform and treat patients. From a societal perspective, the fact that the limits of health care resources are readily visible requires improved efficiencies in delivery and systematic decision-making.See generally supra part II.

¹¹¹ See generally Orentlicher, supra note 4.

¹¹² See supra notes 1-4 (discussing the capitation of health care in California, Oregon, and Washington).

¹¹³ See Danzon et al., supra note 36, at B14, B15; see supra note 54 and accompanying text.

¹¹⁴ See supra note 51 and accompanying text (discussing formularies).

¹¹⁵ Gardner & Maroney, supra note 1, at 40.

¹¹⁶ But see Himmelstein & Woolhandler, supra note 8, at 215-23 (stating that HMOs have not contained costs, HMOs offer no clear advantages in the rate of premium increase, more HMOs correlates with greater cost increases, HMOs have higher insurance overhead costs, and overheads and profits consume 18-25% of HMO revenues).

¹¹⁷ See, e.g., id.; Perot, supra note 4, at 162 (“In 1994, the CEOs of some of the largest for-profit HMOs received an average of $7 million each in compensation for the year.”); Griffin, supra note 68, at 14 (“In Minnesota alone, the eight big managed care organizations ran up profits of $51 million in 1994.”); see also Gannon, Melissa, Publicly Held HMOs: Are They Profiting at the Expense of Policyholders?, Boston Bus. J., Feb. 16-22, 1996, at 26, 28Google Scholar. “Critics of HMOs say that while hospital services and general patient care are being cut to the bone, for-profit HMOs have become the darlings of Wall Street, posting huge profits, and HMO executives are collecting as much as $15 million a year in salaries and stock options.” 60 Minutes: HMO 19 (CBS Television News, vol. 28, no. 3, Oct. 1, 1995); see also 20/20: The Ultimate Cost, supra note 2.

¹¹⁸ See infra part IV.C.

¹¹⁹ See, e.g., 60 Minutes: HMO, supra note 117; 20/20: The Ultimate Cost, supra note 2.

¹²⁰ See Perot, supra note 4, at 165-66. For the purposes of this Article, quality of care refers to the impact of care on patient health, independent of the amount of money spent on care. See Danzon et al., supra note 36, at B14, B15 (“To the extent quality is a factor in negotiations, the trend is to measure quality by successful outcomes, and not costly inputs as in the past.”).

¹²¹ For illustrations of such anecdotes, see 60 Minutes: HMO, supra note 117; 20/20: The Ultimate Cost, supra note 2.

¹²² See generally Orentlicher, supra note 4 (discussing the discontinuities in the patient-physician relationship).

¹²³ Managed care may, for example, break continuity in the physician-patient relationship. See Orentlicher, supra note 4, at 143 (citing Council on Ethical and Judicial Affairs, Am. Med. Ass'n, Code of Medical Ethics: Current Opinions With Annotations, at xxxiv (1994)) (emphasizing the importance of continuity in the physician-patient relationship to promote trust, openness, and a freer exchange of information).

¹²⁴ Orentlicher,supranote 4, at 165-66. But see Himmelstein & Woolhandler, supra note 8, at 227-30.

¹²⁵ Hall, supra note 1, at 715-16 (relying on the outcome of RAND Corporation’s Health Insurance Experiment, which used a rigorous randomization protocol and compared health outcomes of varied population groups assigned to traditional insurance, HMOs, and out-of-pocket payment arrangements); see also Anders, George, Medicare HMOs Get Fewer Complaints, Wall St. J., Mar. 4, 1996, at B3Google Scholar (reporting that the big plans of California, Florida, and Arizona, which generate complaints, are not representative of plans in general); Stein, Charles, Medicaid Managed-Care Program Gets High Marks, Boston Globe, Mar. 16, 1996, at 61, 62Google Scholar (reporting that majority of Massachusetts Medicaid recipients are satisfied with the state’s HMO-style managed care plan) [hereinafter Stein, Medicaid Managed-Care]; Study: HMOs Cut Costs, Maintain Care, Boston Globe, Feb. 1, 1996, at 15 (stating that HMOs and other managed care programs are cutting hospital costs without hurting the quality of care).

¹²⁶ Orentlicher, supra note 4, at 162 (citing Elizabeth M. Sloss et al., Effect of a Health Maintenance Organization on Physiologic Health: Results from a Randomized Trial, 106 Annals Internal Med. 130, 130 (1987)). “However, in a recent study of elderly patients with chest or joint pain, researchers found that patients with joint pain were less likely to report an improvement in their pain when they received care from an HMO rather than under a fee-for-service insurance plan.” Id. at 163 (citations to other studies omitted); see also Himmelstein & Woolhandler, supra note 8, at 230 (stating that managed care works worst for those who are poor and ill). But see Stein, Charles, In Fixed-Fund Health Plan, Care on Rise, Boston Globe, Jan. 30, 1996, at 1, 9Google Scholar (explaining that HMO discovered, over time, that giving elders preventative care instead of more care increases profit).

¹²⁷ Orentlicher, supra note 4, at 159 (citing Robert H. Miller & Harold S. Luft, Managed Care Performance Since 1980: A Literature Analysis, 271 Jama 1512, 1516 (1994)).

¹²⁸ See Hall, supra note 1, at 715-16 (“Studies of physician behavior in crowded intensive care units reveal that doctors implicitly respond with plausible rationing criteria. They systematically screen out the less serious cases and there is no apparent denial of services to dying patients.”).

¹²⁹ For a penetrating account of this discretion, see JAY KATZ, The Silent World of Dr. and Patient (1984); see also Griffin, supra note 68, at 14 (“[M]uch of the decision making has been taken away from those who really understand about patient care and given to management types, bean counters, and CEOs with their eyes on the bottom line and their own fat paychecks.”). A question which should be kept in the forefront of the minds of public health policymakers is “What patient would want to be treated by his or her insurer?"

¹³⁰ See supra part II.B.l; see also John K. Iglehart, Health Policy Report: Managed Care and Mental Health, 334 New Eng. J. med. 131, 131 (1996). Because providers’ fees are the same regardless of the services they provide, capitation places a financial incentive directly on physicians and hospitals to limit the services they make available to each patient. Bass, Focusing, supra note 53, at 32 (50% of group HMOs which directly employ doctors, 74% of network HMOs which contract with doctors, and 34% of physician practice organizations tie doctors’ pay to cost containment). In the most practical terms, providers may refrain from requesting multiple visits and specialist referrals, and from requiring costly lab tests; and they may opt for more outpatient-based ambulatory care to contain the per capita treatment cost. According to critics and some anecdotal evidence, providers may also refrain from giving adequate care to each patient. See 60 Minutes: HMO, supra note 117, at 15, 16-19 (anecdotes to support the proposition that harsh financial incentives on providers are resulting in deprivation of standard care); 20/20: The Ultimate Cost, supra note 2, at 4, 5-6 (anecdotes that illustrate instances where providers in HMOs are being forced to see too many patients to provide standard care and where HMOs hire bargain-rate laboratories that fail to maintain quality standards with fatal consequences); see also Knox, Richard A., The Rush is On—In Doctors’ Offices: Managed Health Care Brings Pressure to See More Patients, Boston Globe, Mar. 2, 1996, at 1Google Scholar. But see Stein, Medicaid Managed-Care, supra note 125, at 62 (reporting that, based on 1,000 responses to a survey, the majority of Massachusetts Medicaid recipients are satisfied with the state’s HMO-style managed care plan). Proponents of capitation argue that it maximizes preventative care because it is in the provider’s self-interest to keep patients as healthy as possible. Paris, Steven & Vernick, Richard , Good Managed Care Means Good Health Care, Boston Globe, Nov. 21, 1995, at 3.Google Scholar

¹³¹ Orentlicher, supra note 4, at 142. Capitation is often accompanied by a managed care restriction that patients are limited to specific groups of doctors and hospitals. See Griggs, Ted, La. HMOs Get Health Plan, Baton Rouge Advoc, July 23, 1995, § Business, at 21.Google Scholar

¹³² See, e.g., Griffin, supra note 68, at 13 (“All over America, in a chilling wave, physicians have been swallowed up by the system—by hospitals, by managed care organizations, by gigantic entities.”).

¹³³ See, e.g., 60 Minutes: HMO, supra note 117, at 21 (“[Y]ou're going to see a lot of good community physicians being forced out of business simply because they refuse to bend to the demands of the managed- care organizations, and they continue to practice what they feel is medicine in the best interest of their pa tients.”); see also 20/20: The Ultimate Cost, supra note 2 (discussing the negative effects of managed care systems’ cost-cutting measures on health care delivery).

¹³⁴ See Orentlicher, supra note 4, at 157-58.

¹³⁵ 60 Minutes: HMO, supra note 117, at 16; see also 20/20: The Ultimate Cost, supra note 2.

¹³⁶ See generally Erik Larson, The Soul of an HMO, TIME, Jan. 22, 1996, at 44. This problem appears to be national in scope and affects health care institutions as well as individual providers. See Himmelstein & Woolhandler, supra note 8, at 218 (stating that, in many cities, hospitals, under their contracts with HMOs, are forbidden from disclosing and even complaining about the discounts they are forced to give—discounts which exceed their discounts to Medicare). There was enough evidence of such practices in the Commonwealth of Massachusetts to enact legislation prohibiting them. See An Act Further Protecting the Confidentiality of Patients, 1995 Mass. Acts H.B. 5347; see also Bass, Alison, New Law Bans Gag Rules on Doctors, Boston Globe, Jan. 23, 1996, at 18Google Scholar; Bass, Focusing, supra note 53, at 32; Bass, Alison, Therapists Say Insurer Gag Order Hurts Patients, Boston Globe, Dec. 20, 1995, at 1, 18.Google Scholar

¹³⁷ “Although physician capitation aims to correct incentives, it may lead to undertreatment because physicians earn more by limiting care, including tests and referrals.” Teisberg et al., supra note 7, at 135; see also Orentlicher, supra note 4, at 149, 160 (“If incentives to expand services result in greater use of those services and possibly overtreatment of patients, then it arguably follows that incentives to limit care will result in lower use of those services and possible undertreatment.”). But see Hall, supra note 1, at 759 (“HMOs have resorted to these explicit inducements because other mechanisms for instilling cost consciousness such as education or peer review are notoriously ineffective if they are employed without reinforcing financial incentives.”).

¹³⁸ Orentlicher, supra note 4, at 158; see also Robert Pear, H.M.O.’s Refusing Emergency Claims, Hospitals Assert, N.Y. Times, July 9, 1995, at 1 (alleging that HMOs are increasingly denying claims for care provided in hospital emergency rooms).

¹³⁹ See Orentlicher, supra note 4, at 155 (“[I]f physicians become responsible for rationing decisions, patients may become increasingly distrustful of their physicians.”).

¹⁴⁰ See generally Katz, supra note 129.

¹⁴¹ See supra note 136.

¹⁴² Orentlicher, supra note 4, at 178-79.

¹⁴³ Health care insurance may be declared an employee benefit when employers self-insure, thereby subjecting the insurance provided to regulation under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1994). See generally, Watson, Roberta C., Issues in the Administration of Health Plans, C980 ALI-ABA 1007 (1995)Google Scholar. ERISA generally has been interpreted to preempt state laws and regulations, including those which would otherwise apply to health benefits provided by self-insuring employers. See McGann v. H&sssH Music, 946 F.2d 401 (5th Cir. 1991), cert. denied, Greenberg v. H&H Music Co., 506 U.S. 981 (1992). However, recently the U.S. Court of Appeals for the Third and Tenth Circuits concluded that ERISA preemption is not an absolute defense to claims of medical malpractice. See PacifiCare of Okla., Inc. v. Burrage, 59 F.3d 151 (10th Cir. 1995); Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3rd Cir.), cert. denied, 116 S. Ct. 564 (1995); see also Van Duch, Darryl, Courts Peel HMOs Shield in Medical Malpractice Cases, Nat'l L.J., Sept. 4, 1995, at B1-B2.Google Scholar

¹⁴⁴ Hall, supra note 1, at 759 (“[P]roperly informed insurance subscribers may rationally agree to strategically crafted incentives which better induce doctors to act as both medical treatment and economic purchasing agents for their patients.”).

¹⁴⁵ “[S]ociety still imposes no requirement that insurers disclose their rationing incentives and mechanisms, and the permissible range of rationing decisions has yet to be explored. This is due in large part to the political taboo that presently attaches to any public acknowledgment of the need to ration even incrementally.” Hall, supra note 1, at 780. But see Cal. Health & Safety Code § 1374.66 (West 1995 & Supp. 1996) (requiring disclosure of financial incentives).

¹⁴⁶ Orentlicher, supra note 4, at 155 (“Because of the concerns about physician decision making, it is important that society issue rationing guidelines that are as specific as possible to lead physicians in the right direction.”); see also Kadzielski et al., supra note 108, at 169 (stating that guidelines, beyond being clear, uniform, and consistent, must take into consideration regional factors and maintain flexibility to account for technological change). The cost-benefit/cost-effectiveness analysis required to compile such guidelines and discussion of actual efforts to do so is discussed and explored in Cost-Benefit/Cost-Effectiveness, supra note 64.

¹⁴⁷ See infra part IV; see also Sage & Jorling, supra note 50, at 1029-30;Smaha, Therese A., Hospitals Collaborate on Uniform Guidelines for Care, Boston Bus. J., Feb. 16-22, 1996, at 34-35.Google Scholar In addition to the Oregon effort addressed at supra note 64, perhaps the most ambitious state effort to develop and study such guidelines is a five-year experiment commenced in 1990 in the state of Maine. See Me. Rev. Stat. Ann. tit. 24, §§ 2973, 2975 (West 1990 & Supp. 1995). When a physician adheres to the Maine guidelines, compliance with the best possible process of care is presumed and, regardless of the outcome, the physician is immune from suit. Kadzielski et al., supra note 108, at 164. Such guidelines have been developed in Maine for anesthesiology, emergency medicine, gynecology, obstetrics, and radiology. Id. Moreover, hospitals are designing more and more extensive clinical practice guidelines with input from doctors and nurses. Perhaps the most high-profile effort in this area is the Acute Physiology and Chronic Health Evaluation (APACHE) system, which is being tested in Michigan and several other states. See Karen Lappa, Value of Severity Measurement Still Open to Debate,’ HOSP. & HEALTH NETWORKS, Nov. 5, 1989, at 35 (severity of illness software); Millenson, Michael L., Quality Medical Treatment—By the Numbers, Cm. Trib., May 9, 1993, at 1Google Scholar. Through the input of data on a given patient’s condition, providers'generate a standardized assessment. See Lappa, supra; Millenson, supra. Guidelines also are being generated at the federal level. The IOM, part of the National Academy of Sciences, has assisted the Agency for Health Care Policy and Research (AHCPR) to generate and publish two volumes of guidelines based primarily on treatment outcomes and effectiveness of research. See Pub. L. No. 101-239, § 6103, 103 Stat. 2106, 2189 (1989) (codified as amended at 42 U.S.C. § 299 (1994)). One of the first and most extensive efforts at developing clinical practice guidelines to date was developed by the Clinical Efficacy Assessment Project of the American College of Physicians. Kadzielski et al., supra note 108, at 158-59. Medical societies such as the AMA are also generating guidelines. In 1990, the AMA listed over 1,000 so-called practice parameters. Id.

¹⁴⁸ See Centers for Disease Control and Prevention, Prevention and Managed Care: Opportunities for Managed Care Organizations, Purchasers of Health Care, and Public Health Agencies, 275 Jama 26, 27-29 (1996).Google Scholar Of course, the diversity of conditions presented by such a large patient pool would limit the reliability of any guidelines to contemplate all conditions that arise, meaning that a core of physician discretion must be maintained. Cf. Kadzielski et al., supra note 108.

¹⁴⁹ See infra part IV.B; Sage & Jorling, supra note 50, at 1029-30. See generally Kadzielski et al., supra note 108, at 158 (proper use of practice guidelines should reduce the cost of health care services and protect physicians from malpractice liability). In a world of contracts, written standards may serve both to protect and police health care providers answering to care managers.

¹⁵⁰ Kadzielski et al., supra note 108, at 158, 169 (“[N]obody has really tried to measure what impact upon clinical physicians practice guidelines have had.”); Orentlicher, supra note 4, at 172-76 (failure of previous guidelines to change physician behavior).

¹⁵¹ Changing behavior through the medical profession rather than through state insurance regulations is a means to overcome the preemptive effect of ERISA, which is addressed in supra note 143 and the accompanying text.

¹⁵² See supra note 42 (discussing wasteful consumption of medical technology); see also notes 26, 107- 08 and accompanying text (same).

¹⁵³ See generally supra note 110 and accompanying text.

¹⁵⁴ Teisberg et al., supra note 7, at 138.

¹⁵⁵ For example, the Attorney General of Massachusetts is seeking more regulatory authority to oversee hospitals and HMOs after they convert to for-profit companies. See Alex Pham, Harshbarger Seeks Power to Regulate For-Profit Health Care, Boston Globe, Nov. 8, 1995, at 50. Among the concerns raised in support of expanded authority is that for-profit hospitals will engage in “cream skimming" patients profitable to treat and dumping uninsured patients on nonprofit hospitals. Id. The state of Louisiana is forcing the HMOs within its borders to maintain a $2 million financial cushion to cover claims, and regulators generally are assuming greater controls over the industry. See Griggs, supra note 131, at 1.

¹⁵⁶ Orentlicher, supra note 4, at 146.

¹⁵⁷ Hall, supra note 1, at 773-74; Allan L. Hillman et al., How Do Financial Incentives Affect Physicians’ Clinical Decisions and the Financial Performance of Health Maintenance Organizations?, 321 New Eng. J. Med. 86, 90-91 (1989).

¹⁵⁸ Teisberg et al., supra note 7, at 138.

¹⁵⁹ Beyond state law causes of action premised on breach of contract, malpractice, negligence, and general tort principles, health care consumers may bring actions in many states premised on wrongful birth and wrongful life causes of action. See Jackson, Anthony,Action for Wrongful Life, Wrongful Pregnancy, and Wrongful Birth in the United States and England, 17 Loy. L.A. Int'l & Comp. L.J. 535 (1995)Google Scholar (prenatal screening failure, due to laboratory negligence, resulted in birth of child with condition parents sought to avoid, Tay Sachs). Such liability is tied to the expanding ability to predict prenatally conditions affiliated with genetic abnormalities. Health care consumers dissatisfied with their quality of care or their ability to procure reasonable coverage also may bring claims premised on numerous federal causes of action, including:

¹⁶⁰ See supra part III.B.

¹⁶¹ See generally PARIS & MURPHY, supra note 74; Paris et al., Loss Ratio, supra note 14 (explaining loss of physician autonomy in light of practice guidelines).

¹⁶² See 60 Minutes: HMO, supra note 117; 20/20: The Ultimate Cost, supra note 2.

¹⁶³ Rothstein, Mark A., The Ethics of Tiered Health Care,Health L. News, Sept. 1995, at 2-3Google Scholar; see also Ford, supra note 32, at 130-34.

¹⁶⁴ Orentlicher, supra note 4, at 159 (physician perception of risk of malpractice lawsuit is up to three times the actual risk of suit).

¹⁶⁵ Kadzielski et al., supra note 108, at 171.

¹⁶⁶ Sage & Jorling, supra note 50, at 1018; see also Hall, supra note 1, at 708 (“In an increasing number of lawsuits, plaintiffs’ lawyers are arguing that HMO physicians’ decisions to withhold treatment, such as pap smears or biopsies to detect cancer, were inappropriately influenced by undisclosed financial incentive plans.”). The claims raised against HMOs are premised on standard breach of contract, negligence, fraud, conspiracy, and tortious interference theories. Id. at 708-09. There is evidence that some juries are recognizing that “coverage decisions are increasingly likely to have direct clinical consequences.” Sage & Jorling, supra note 50, at 1018. For example, “a California jury held a prominent . . . HMO liable for denying coverage for the cost of a breast cancer patient’s bone marrow transplant which the HMO argued was ‘experimental’ treatment. The jury awarded $89 million to the family of the deceased patient.” Id. at 1009 (citing Fox v. Health Net Management Holdings, No. 219692 (Cal. Sup. Ct. Dec. 28, 1993)). Evidence was introduced at trial that the HMO’s medical director responsible for the decision was compensated on the basis of how much money he saved the company. Hall, supra note 1, at 709.

¹⁶⁷ See Sage & Jorling, supra note 50, at 1021. For various applications of the concept of enterprise liability and support for the proposition that it is possible to shift liability without getting preempted by ERISA, see Pacificare of Okla., Inc. v. Burrage, 59 F.3d 151 (10th Cir. 1995) (deciding that a vicarious liability claim against an HMO is not preempted by ERISA); Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3rd Cir.), cert. denied, 116 S. Ct. 564 (1995) (alleging that HMO failed to exercise reasonable care in selecting and monitoring personnel who treated widow’s husband); Van Duch, supra note 143, at B1-B2. But see Corcoran v. United Healthcare Inc., 965 F.2d 1321 (5th Cir. 1992) (holding that a tort action for wrongful death against the provider of utilization review services was preempted by ERISA). Corcoran v. United Healthcare Inc., 965 F.2d 1321 (5th Cir. 1992) (holding that a tort action for wrongful death against the provider of utilization review services was preempted by ERISA).

¹⁶⁸ Pub. L. No. 99-660, tit. IV, § 402, 100 Stat. 3784 (1986) (codified as amended 42 U.S.C. §§ 11101-11152(1994)).

¹⁶⁹ The express purpose of the statute is to encourage professional peer review through increased immunities for those participating in the peer review process. See Kadzielski et al., supra note 108, at 157. MCOs, through their hospitals and health care facilities, already are likely to have much of the necessary infrastructure in place. As discussed supra notes 110, 147, organizations that are centered around hospitals or other traditional health care facilities have the advantage of ongoing peer review, credentialing, and quality control processes. In addition, a regulatory environment has developed that sets certain standards for the conduct of these activities. In contrast, nonhospital provider entities must develop quality control processes without the benefit of an established legal framework. Sage & Jorling, supra note 50, at 1029-30.

¹⁷⁰ See supra part II.B; see also Sage & Jorling, supra note 50, at 1021.

¹⁷¹ See Sage & Jorling, supra note 50, at 1021.

¹⁷² See id. at 1039.

¹⁷³ See supra text accompanying note 127.

¹⁷⁴ See, e.g., Managing to Care, supra note 5, at 70; 60 Minutes: HMO, supra note 117; 20/20: The Ultimate Cost, supra note 2. The refusal of an HMO to pay for a patient’s treatment if any part of it is experimental is exemplified in the story told by an oncologist at the Yale-New Haven Hospital. According to this oncologist, he was treating a patient for malignant melanoma with two standard anti-tumor drugs and a third drug. The third drug was believed to make the other two more effective and less toxic, and it was supplied by NIH at no additional cost. When the patient’s MCO discovered that the third drug was investigational, the doctor was allegedly told that the organization was not willing to pay for the treatment. Managing to Care, supra note 5, at 70. Managed care short-sightedness is also illustrated through an example involving the Comprehensive Sickle Cell Centre at Children’s Hospital in Oakland, California. The treatment program at the Centre has been proven to reduce dramatically the number of deaths and complications from the disease, thereby reducing costs in the long-run. However, MCOs have refused to cover the Centre’s program because it costs more than treatment programs elsewhere.

Id.

¹⁷⁵ See Managing to Care, supra note 5, at 70, 75 (managed care is eliminating the subsidies for R&D traditionally collected by teaching hospitals through inflated fees).

¹⁷⁶ For decades, this HMO has entered its patients in NIH-sponsored trials and conducted its own studies. Id. at 70.

¹⁷⁷ For example, Prudential Health Care System in Roseland, New Jersey, absolutely refuses to cover any experimental treatments on the grounds that doing so will inflate costs for subscribers. See id.

¹⁷⁸ Id.; see supra note 174; see also Rowe, John, Keeping Academic Medicine Healthy, Boston Globe, Mar. 12, 1996, at 36Google Scholar (addressing the impact of changes in the structure and financing of the health care industry on Boston-area hospitals and proposing a federal graduate education trust fund).

¹⁷⁹ Medical schools and their affiliated teaching hospitals, long among society’s most prosperous and prestigious institutions, are being rapidly undermined by the growth of managed health care, which uses as few as half as many doctors as traditional fee-for-service medicine and drastically cuts reliance on hospitals, the most personnel-intensive sector of health care.

Knox, Richard A., Strong Steps Urged to Ease Glut of Nurses and Doctors, Boston Globe, Nov. 17, 1995, at 1, 42.Google Scholar These reductions in financial support are especially painful because they accompany direct federal and state cuts that penetrate deeply into the budgets of teaching hospitals. See Canellos, Peter S., State to Cut Funding for Free Care, Boston Globe, Dec. 11, 1995, at 1, 7Google Scholar (reporting that Massachusetts, has cut the proportion of money it pays hospitals for treating the uninsured, that proportion now being just 64%); McCloy, Andrew P., Study: State’s Economy to Be Stung by Federal Cuts, BOSTON Bus. J., Mar. 1-7, 1996, at 5Google Scholar (state’s economy could eventually lose up to 50,000 jobs and $4.8 billion in annual output if cuts to federal research funds are executed).

¹⁸⁰ McLaughlin, Thomas, Health Care’s Third Revolution, Boston Bus. J., Oct. 20-26, 1995, at 31.Google Scholar

¹⁸¹ For example, regulators could develop an approach along the Quality-Adjusted Life Years (QALYs) and Well Years approach used to measure the efficacy of treatments. Peters, supra note 32, at 495. QALYs calculations, which have been used to assess marginally effective treatments and to standardize rationing, are based upon estimates of likely outcomes and the anticipated impact of treatments on the quality of patients’ lives. Id. Note, however, that quality-of-life and cost-benefit calculations in the health context have been the source of tremendous controversy, in Oregon and throughout academia. See generally supra note 64.