"The Assault on Managed Care: Vicarious Liability, Class Actions
and the Patient's Bill of Rights"
BY: RICHARD A. EPSTEIN
University of Chicago Law School
ALAN O. SYKES
University of Chicago Law School
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Paper ID: U Chicago Law & Economics, Olin Working Paper No. 112
Date: December 2000
Contact: RICHARD A. EPSTEIN
Email: Mailto:repstein at midway.uchicago.edu
Postal: University of Chicago Law School
1111 E. 60th St.
Chicago, IL 60637 USA
Phone: 773-702-9563
Fax: 773-702-0730
Co-Auth: ALAN O. SYKES
Email: Mailto:alan_sykes at law.uchicago.edu
Postal: University of Chicago Law School
Frank and Bernice J. Greenberg Professor of Law
1111 E. 60th St.
Chicago, IL 60637 USA
Paper Requests:
Contact Marjorie Holme, Program Administrator and Discussion
Paper Coordinator, Olin Law and Economics Program, University of
Chicago Law School, 1111 E. 60th Street, Chicago, IL 60637.
Phone:(773)702-0220. Fax:(773)702-0730.
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ABSTRACT:
The current level of public dissatisfaction has engendered a
long list of proposed reforms that seek to increase the overall
level of public regulation of Managed Care Organizations (MCOs),
by limiting the scope of preemption under ERISA, by expanding
doctrines of vicarious liability and implied agency, by adopting
a patient's bill of rights, and by exposing them to class
actions by disappointed plan participants. In response, this
paper argues that most of these reforms are ill-conceived, in
the sense that they do not hold any realistic possibility of
improving the performance of the health care system relative to
the current set of tort and contract doctrines that are now in
place. Direct actions against MCOs for example are likely to
hamper their mission to contain costs. The usual conditions that
make vicarious liability sensible, for example, are not likely
to pertain here when physician groups have assets to meet
anticipated claims against them. And the use of class actions
runs the serious risk of introducing dubious claims for
liability based on some broadside allegations of fraud when
their proper function is restricted to allowing the amalgamation
of individual claims that would otherwise be too costly to
pursue on an individual basis. The real problem with MCOs is
that in conditions of scarcity, the public is unable to
reconcile its inconsistent demands for low premiums ex ante with
comprehensive and deep coverage ex post.