High Court Decision Keeps Patients from Suing HMOs

The U.S. Supreme Court has limited the right of patients to sue managed-care companies for malpractice.

In February, I wrote about a consolidated case that was before the Supreme Court. Aetna Health v. Davila, No. 02-1485, and Cigna HealthCare of Texas v. Calad, No. 03-83. On June 21, the high court reversed the court of appeals and ruled that patients cannot seek damages if their HMOs refuse to pay for doctor-recommended medical care.

Relying on a 1974 federal statute, the Employee Retirement Income Security Act (ERISA), which prohibits states from allowing patients to sue HMOs for refusing to pay for treatment, the court found that HMOs cannot be held accountable for the damages that ensue from their negligent decisions. That statute predates the dawn of managed care and the entirely different way in which health-care decisions are made.

As a result of the court’s decision, injured patients are left without an adequate remedy when they are denied certain types of treatments. The decision also shifts responsibility to physicians and others in the medical field for decisions made by bureaucrats in the managed-care insurance morass, thereby insulating the insurers from liability. The court, in essence, determined that these decisions are financial, not medical.

The high court’s decision is at odds with 10 states that enacted patients’ rights legislation. The case emanated from Texas, which enacted a patients’ right law after Congress failed to pass a federal law. The decision also conflicts with the decision of the Illinois Supreme Court in Petrovich v. Share Health Plan of Illinois, 179 Ill.2d 616, 705 N.E.2d 448 (1998).

I wrote about that well-reasoned case years ago when it was rendered ("Right to sue prescribes the necessary treatment for HMOs," November, 1999). In writing for a unanimous court then, Justice Michael Bilandic found that, "The principle that organizations are accountable for their ... actions and those of their agents is fundamental to our justice system. ... There is not exception to this principle for HMOs."

And he was right. Accountability is what is critical here, particularly when you are talking about for-profit entities, like HMOs, that are making life-and-death decisions with the goal of containing costs. The Supreme Court of the United States, though, decided to instead rely upon a 30-year-old law that allows these corporations to be shielded from their actions.

"The patients who are improperly denied healthcare will have no ability any longer to hold their health plans accountable and liable for the harm that they caused, even when it results in death," said Ron Polalck, executive director of Families USA, a health care consumers organization. Likewise, the American Medical Association expressed disagreement with the court’s decision, calling it "a sad day for America’s patients and the physicians who care for them." Its statement goes on to say that, "By reserving the right to decide what is – and what is not – medically necessary, managed-care plans can now practice medicine without a license, and without the same accountability that physicians face every day."

On another front, though, 700,000 doctors declared a victory in a long-running lawsuit against six big managed-care companies after a federal judge upheld the doctors’ right to seek damages under the federal anti-racketeering law.

The California and Texas medical associations filed a lawsuit on behalf of the nation’s doctors in federal district court. The Honorable Federico Moreno of the District Court in Miami ruled in December, 2003 that the plaintiffs had standing to ask him to require the companies to change their business practices under the Racketeering Influenced and Corrupt Organizations Act (RICO). The doctors contend that the health-insurance companies regularly cut back on payments for medical services and often refuse to permit the doctors to carry out the procedures they thought best. The defendants include United Healthcare of the UniteHealth Group, Coventry Health Care, Wellpoint Health Networks, Humana, Pacificare Health Systems and Anthem Blue Cross Blue Shield. In re: Managed Care Litigation, No. 00-1334-MDL-Moreno (S.D.Fla.).

Two other managed-care companies, Aetna and Cigna, settled with doctors and withdrew from the suit earlier this year. Aetna agreed to pay the plaintiffs $120 million and Cigna agreed to pay $85 million. Both companies said they also would make changes in operating practices demanded by the doctors.

Clearly, doctors are making some headway. What is becoming clear for millions of patients, as I said in my column earlier this year, is that the battle over patients’ rights must now be fought in Congress, where it has been stalled by lobbyists’ groups. The House and Senate passed legislation in 2001 establishing a "patients’ bill of rights," but the compromise version never passed, as House Republicans cut a deal with President Bush that alienated Democrats and split other supporters.

Senate Health, Education, Labor and Pensions ranking member Edward Kennedy, D-Mass., called on Republican leaders to consider legislation establishing a patients’ bill of rights that he co-sponsored with Senators John McCain, R-Ariz., and John Edwards, D-N.D.

"When HMOs make medical decisions that injure or kill patients, they should be held accountable," Kennedy said. "Unfortunately, under current law, HMOs can escape accountability for their harmful conduct. Congress must act now to correct this injustice by passing a patients’ bill of rights that will allow seriously injured patients to seek compensation from the HMOs that caused their injuries."

It is clear that the time is now to renew efforts to pass a federal patients’ bill of rights that truly speaks to the issues of protecting patients. Antiquated laws clearly can no longer do that. All of us must contact our elected officials in Congress to push for rights that are ours but are being denied because of politics and a lack of foresight.