Implementing American Health Care Reform: The Fiduciary Imperative

The success of health reform under the Patient Protection and Affordable Care Act of 2010 will depend upon the sustainability of a brand new and infrastructure of entities, relationships, and procedures. So far, neither jurists, legislators, policy-makers, providers, payers, nor patients have identified an organizing paradigm to implement or regulate this vast new infrastructure. Legal scholars have been curiously absent from this policy discussion, offering little if any insight into the role law plays beyond the familiar political debates about health reform. This article draws a legal chair to the table and takes a refined look at the legal basis for implementing the health reform. Building upon fiduciary law that already governs numerous aspects of medical relationships, in this article I present a new paradigm called the “fiduciary medicine model” to advance the proposition that fiduciary law – particularly agency theory – provides the best conceptual model for understanding and organizing this nation’s emerging health care system. I argue here that fiduciary law should replace contract and tort rules to better address the inevitable challenges that reformers will face. Although courts and scholars currently apply fiduciary law in a haphazard manner to regulate some interactions between providers, payers, and individual patients, I argue to correct this limited view. First, I clarify that one size fiduciary law does not fit all medical relationships. This correction alone will have far-reaching impact as it will help to rectify the Supreme Court’s error in the landmark case, Pegram v. Herdrich. Next I show that within America’s medical industrial complex, patients no longer act individually as principals in medical agency relationships, but instead function in aggregate, contractual groups. The agents with whom these patient groups contract are networks of providers, insurers, health plans, and employers who also act as agents, sub-agents, and principals among themselves. To make sense of this tangle, I introduce lessons learned from economic agency theory. Next, building on popular sovereignty literature, I offer a completely new analogy to show that in health care, the state operates through government officials, much like a corporate agent of the people. In fact, the principal-agent relationship lies at the heart of our democratic form of government. Thus agency law may be read to impose a fiduciary duty upon government to manage competing interests in health care in accordance with the social norms of our democracy – justice, equality, and liberty – and to implement expressed societal goals. The article concludes by offering a model enabling statute, patterned after the Uniform Prudent Investor Act, designed to address some of the most likely objections to the fiduciary medicine model