The HMO War

A former fighter pilot, Dickie Scruggs knows how to pick his targets carefully. Best known for beating down Big Tobacco, Scruggs has a new enemy in his sights: HMOs.

Dan Rather reports on a tough lawyer who takes on big-time foes.

"If it were any other industry that was promising what they promise and delivering what they deliver, they would not only be sued out of existence but prosecuted by every attorney general in the country," he says.

Scruggs terrifies the industries he confronts. His track record suggests that the fear is well founded.

Lawyer Scruggs took on Big Tobacco by putting together an armada of law firms and suing cigarette makers for the cost of smokers' health care. He was joined in the suit by his long-time friend, Mississippi Attorney General Mike Moore. Eventually other states followed. By the time the smoke cleared, Big Tobacco had lost.

Big Tobacco agreed to pay $150 billion. Scruggs' firm received $900 million.

Some say that Scruggs received too much. He disagrees. "If I took that money and just went to the South Pacific and did nothing else with it, I think it would be a very valid criticism," he says.

"(But) it's given us a means to level the playing field with corporate America. Up until now, we didn't have a war chest that could stay with them. And now we do," he says.

Scruggs travels the country in private jets, making his case against HMOs. He has put together an army of law firms and filed suit against some of the biggest HMOs in America: United, Cigna, Pacific Care, Humana and Aetna.

"Many of them just practice garden variety consumer fraud," he says. "They promise to deliver quality health care, and they just don't deliver. They never have any intention of delivering. They jack around their patients, they make them go through all sorts of hoops before they pay the bill. Hopefully they can drive the patient (who's sick) out of their system and into somebody else's plan."

Scruggs claims that HMOs also tell doctors how to treat patients and corrupt medicine by giving doctors bonuses to undertreat patients.

Not everyone agrees with Scruggs. Karen Ignani, who heads the country' s largest HMO lobbying group, says that his solution will only make the system worse.

"If you listen to Mr. Scruggs' prescription, what he says is, 'Let's take the incentives away from the health plans and the way they do it now in the system, and let's put the patients in charge,'" she says.

This will increase costs, Ignani says. "I think consumers are going to be horrified when they hear that as the prescription," she says.

Scruggs is betting millions he knows what Americans want. He can afford to. For a kid who greup poor in Pascagoula, Miss., he has achieved significant success. He now drives a $200,000 Bentley.

He got his first legal break in Pascagoula, when a shipyard worker asked for his help in an asbestos case.

"I ended up sending him to a doctor, getting him tested. And before I knew it, there were five shipyard workers, then 10," he says. "Then dozens everyday showing up in my office."

"When you've got the fate of 7,000 people in your hands in one trial, it's intimidating," Scruggs says.

Succeeding in that case gave him the confidence to take on Big Tobacco, Scruggs adds.

His victory against Big Tobacco also made Scruggs something of a star. His house was used as a location for the movie The Insider. Scruggs auditioned to play himself, but didn't make the cut.

His wife Diane, who has been married to Dickie for 29 years, says that her husband experiences a letdown when he isn't fighting a big case. She says that he is happy now, though, because he has a fight.

Scruggs also has clout on Wall Street, where he has been meeting with large HMO investors. His critics say he tells investors how much his case is going to cost the industry. This is part of a plan to drive down stock prices, and bring major companies to the bargaining table, they say.

"If they're scared, it's only because the companies are doing a poor job convincing their investors that they're doing the right thing," Scruggs says. "This is a huge mismatch for me, as a trial lawyer from Mississippi to be talking to a bunch of Wall Street investors, when they have the best and brightest minds on Wall Street defending their position. If I can scare them, then there's a reason to be scared."

Scruggs is also working in Washington, pushing for a patient's bill of rights that spells out what HMO customers can expect. Among these rights: the right to a second opinion, the right to see specialists and the right to sue.

The fight over a patient's bill of rights has gone on for years. Republican Congressman Charles Norwood says part of the holdup is fear of lawyers like Scruggs.

"He's a trial lawyer trying to get into another big suit," Norwood says. "He's made $300 million in (the) asbestos and tobacco (suits), and he now doesn't have anything to do, so he wants to supplant Congress. Well, we don't need any help, and thank you so much, Mr. Scruggs; we'll take care of business right up here."

Moore, the Mississippi attorney general and Scruggs' friend for 20 years, says the lawyer simply wants to make a difference.

Scruggs sees himself as part of the South's populist tradition. "There's an old saying about reporters," Scruggs says. "They're here to afflict the comfortable and comfort the afflicted. And I love that line because I sort of see that as my role as well - and the role of lawyers."