Supreme Court Set to Determine
                   HMOs' Liability for Cost Cuts

                   By ROBERT S. GREENBERGER
                   Staff Reporter of THE WALL STREET JOURNAL

                   WASHINGTON -- Stepping into a debate with huge stakes for
                   managed-care companies, the Supreme Court agreed to determine the
                   legal liability of these providers when they are accused of cutting costs at
                   the expense of patients' health.

                   The case was among nine the justices added to their docket for this year,
                   as they prepare for the term that begins next week. Other cases range from
                   whether Congress exceeded its authority when it passed the 1994
                   Violence Against Women Act, to whether California may deny a tax
                   deduction to corporations that don't have their headquarters there. The
                   court also will decide whether to limit the activities of certain antiabortion
                   activists outside abortion clinics.

                                        Justice Ruth Bader Ginsburg, who was
                                        operated on for colon cancer over a week ago
                                        and returned home Tuesday, participated in
                                        deciding which cases to take, a court
                                        spokesman said. In a statement, the court
                                        indicated that Justice Ginsburg's medical
                                        prognosis appeared to be good. "All lymph
                   nodes proved negative for cancer and there was no metastasis evident," the
                   statement said.

                   In the managed-care case, Cynthia Herdrich claims that to hold down
                   costs, her doctor at a health-maintenance organization run by Health
                   Alliance Medical Plans Inc. of Urbana, Ill., delayed treating what was
                   appendicitis. Among other legal actions, Ms. Herdrich sued her doctor and
                   the HMO under the Employment Retirement Income Security Act, or
                   Erisa, the 1974 law governing employee pension and health plans. She
                   charged that the delay was motivated by the HMO's desire to save money,
                   rather than to act in the patient's best interest, as mandated by Erisa.

                   The U.S. appeals court in Chicago ruled that the lawsuit under Erisa may
                   go forward, and if the Supreme Court agrees, it will reshape the landscape
                   for HMOs, says a lawyer for the defendants in the case. "The fundamental
                   assumption now is that HMOs will create incentives to save money and
                   provide health care that's affordable," says Carter Phillips, a Washington
                   attorney with Sidley & Austin, who is representing the HMO. "If the
                   appeals court is right, HMOs as we know them will be hard pressed to
                   survive." (Pegram vs. Herdrich)

                   In the Violence Against Women Act case, the justices will review a lawsuit
                   brought by former student at Virginia Polytechnic Institute who claimed she
                   was raped by two football players. The case gives the high court the
                   opportunity to, once again, examine the scope of the Commerce clause of
                   the Constitution, which over the past half-century has given the federal
                   government authority to extend its reach, from civil rights to the
                   Endangered Species Act.

                   In 1995, the high court for the first time since the 1930s, reversed that
                   extension when it ruled that the U.S. had exceeded its power to regulate
                   interstate commerce with a law banning guns near schools. Now, the court
                   may use the 1994 Violence Against Women Act, which established
                   gender-based violence as a federal crime, to further define its views on
                   how far Congress may go to regulate noneconomic activity under the
                   Commerce clause. (Brzonkala vs. Morrison)

                   The tax case was brought by Hunt-Wesson Inc., a unit of ConAgra Inc.,
                   based in Omaha, Neb. Hunt-Wesson claims that California, by denying a
                   tax deduction for interest expense to certain companies that operate but
                   aren't based there, violates the Commerce and Due Process clauses of the
                   Constitution. "If California is upheld, then other states will do this. It
                   amounts to a double tax on income," says Donald Falk, an attorney in the
                   Washington office of Mayer Brown & Platt. (Hunt-Wesson Inc. vs.
                   Franchise Tax Board)

                   The justices also will decide the constitutionality of a Colorado law that
                   makes it a criminal offense to counsel, protest or communicate within eight
                   feet of a person while within 100 feet of an abortion clinic. The case was
                   brought by so-called sidewalk counselors who offer alternative actions to
                   women on their way into abortion clinics.

                   The case, brought by three such counselors, contends that the 1993 state
                   statute violates their free-speech rights because it burdens "would-be
                   speakers with the duty of obtaining consent before communicating with the
                   public." The state's attorney general counters that protestors outside
                   abortion clinics often block the facilities and harass patients. (Hill vs.
                   Colorado)

                   In another case, the Supreme Court will try to spell out when the Internal
                   Revenue Service's three-year statute of limitations begins for income-tax
                   refunds. A lower court denied a request for a $1,175 tax credit from David
                   Baral, a former Washington Post mailroom worker, for overpayments he
                   made in 1988. Mr. Baral didn't file his 1988 tax return until 1993, beyond
                   the three-year statute of limitations for refunds.

                   Mr. Baral argued the statute of limitations should start when he filed the
                   return; the IRS said the clock starts ticking when the tax is paid. (Baral vs.
                   U.S.)