2003-11-03 -- Patient Suits Against HMOs Back in Court

The Supreme Court has agreed to hear cases involving suits against
HMOs, and two appeals courts have ruled that it is legal.


Associated Press, November 3, 2003

Supreme Court to Rule on Patients' Rights

By ANNE GEARAN, Associated Press Writer

WASHINGTON - The Supreme Court said Monday it will settle a fight over
patients' legal rights when their HMOs refuse to pay for recommended
medical treatment.

The case involves an issue that has stymied Congress, which has tried
and failed to pass national patients' rights legislation. Some states
have their own laws, but the question of where patients can sue and
what they can ask for in court still is unresolved.

The court's answer could determine whether patients can win large
amounts of money if insurers refuse to pay for beneficial or even
lifesaving treatment. If the court sides with insurers, it would mean
that state courts, and the potential they offer for big damage awards
from juries, would be off limits for most negligence or malpractice
suits against HMOs.

Lower courts have divided over the question of whether federal law
allows the kind of negligence or malpractice suit at issue in this
case.

The court agreed to hear two appeals, one from a patient and one from
an insurer. The patient is a Texas man whose insurer required him to
try a cheaper alternative to the painkiller Vioxx, which his doctor
had prescribed for arthritis.

Juan Davila claims the cheaper drug caused bleeding ulcers and almost
caused a heart attack. Davila ended up in the emergency room in 2000,
where he says doctors told him he was hours away from bleeding to
death. Davila recovered but can no longer take any pain medication
that is absorbed through the stomach.

Davila filed a lawsuit against his health insurer, Aetna Health Inc.,
for negligence. He sued in Texas courts, under a state patient
protection law.

In the second case, Cigna Healthcare appealed a ruling involving Texas
hysterectomy patient Ruby Calad. She sued because Cigna would only pay
for one day in the hospital after surgery, though her doctor had
recommended a longer recovery. Calad said she suffered complications
that forced her into the emergency room a few days later. A lower
court ruled Calad could pursue the case.

Insurers claim that a 1974 federal law governing employee benefit
plans trumps state patient protection laws or other state laws that
allow medical negligence suits in local courts.

Lower courts are divided over the reach of the law, which requires
that disputes over benefits be resolved in federal courts. The Supreme
Court has previously ruled some kinds of lawsuits out of bounds in
state courts, where damages are generally higher.

At issue now are lawsuits over a large gray area where decisions about
treatment and insurance coverage mingle. In most such cases, a doctor
affiliated with an HMO recommends one thing but HMO administrators
reject the request because the treatment is not covered by the plan.
The administrators may recommend something else instead.

The Davila and Calad cases are typical of what happens next.

In both instances, insurers claimed the original lawsuit belonged in
federal court because the claim could have been brought under the 1974
law, the Employee Retirement Income Security Act, or ERISA. Once the
suit was moved to federal court, the insurer asked that it be
dismissed because it was an improper lawsuit under ERISA.

ERISA allows suits to permit a patient to get a particular benefit
that the plan has denied, but not patient lawsuits for monetary
damages. The law predates the rise of managed care, and lawyers and
judges have called for an overhaul.

Employer-sponsored health insurance covers nearly 160 million people
now in the work force and their families, as well as 16 million
retirees, according to court filings in a related lawsuit.

As of 2001, 93 percent of employees with employer-sponsored health
plans were enrolled in some kind of managed care.

The cases are Aetna Health Inc. v. Davila, 02-1845, and Cigna
Healthcare of Texas Inc. v. Calad, 03-83.


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Los Angeles Times, November 2, 2003



U.S. Courts Rule Patients Have Right to Sue HMOs

Two appeals verdicts go against interpretation of a 1973 law  that has
shielded health-care groups from damages.

By David G. Savage Times Staff Writer

WASHINGTON - The Patient's Bill of Rights may have died in Congress,
but the patient's right to sue a health-care network for substandard
medical care is alive again, thanks to a pair of recent federal court
rulings.

In one ruling, the widow of a New York man who died of cancer won the
right to sue her late husband's health-care plan for having refused to
pay for a stem cell transfusion that his doctor said might have saved
his life.

In the second, a U.S. appeals court cleared the way for two Texans to
sue for damages. One case involved a woman who suffered complications
after being sent home one day after surgery. In the second, a diabetes
patient said he nearly died from internal bleeding after he was denied
a costly prescription drug.

Until this year, health maintenance organization-covered employees and
their families had been barred from suing health-care plans because of
Supreme Court decisions interpreting the federal law that governs
pensions and benefits. But the two appeals courts ruled the law does
not shield an HMO for its medical decisions.

The rulings revived one of the fiercest debates of the 1990s over
managed care and patients' rights. They are being challenged by the
health-care industry and major business groups in a series of appeals
before the Supreme Court.

Allowing lawsuits "will do nothing but drive up the national
health-care costs even higher," said Stephen Bokat, general counsel
for the U.S. Chamber of Commerce.

But advocates for the patients and survivors said the law should not
protect HMOs when their bad decisions result in injuries and deaths.

"We are only asking the company be held responsible for a negligent
decision," said David L. Trueman, a patients-rights lawyer in New York
who represents Bonnie Cicio, the widow who sued over her husband's
death. "This is a big deal. The issue is whether millions of consumers
can sue to fight the abuses of managed care."

The justices could act on one of the appeals to clarify the law as
soon as Monday.

The dispute involves employer-sponsored health plans. More than 130
million Americans are insured for health care through an employer or
union.

Before the 1990s, most employers bought insurance policies for their
workers, and disputes over coverage were typically handled by state
regulators - and in the worst cases, through lawsuits in state courts.

But in the last decade, many employees were enrolled in a managed care
network or HMO. And when disputes arose, they learned they were not
free to sue the HMO for damages in a state court.

This no-suits rule grew out of an interpretation of a pension reform
law enacted by Congress in 1973. In that measure, lawmakers set out to
ensure that workers would receive the pensions and benefits they had
been promised by employers. In return, employers won the assurance
that this national law would prevent states from mandating more
benefits for workers.

In the mid-1980s, the Supreme Court handed down several little-noted
decisions saying that the 1973 federal law preempted, or trumped, all
laws and claims arising from state courts. To their surprise,
plaintiffs' lawyers discovered that the federal pension reform law had
the effect of blocking all damage suits against HMOs in a state court,
where victims can win huge verdicts for negligent care.

As a result, victims of alleged substandard care had virtually no
remedy in court. Blocked from state courts, they could sue in federal
courts, but only to "recover benefits due," as the law put it. This
amount was often trivial. For example, if a patient were denied a
medical test and later died from a disease that could have been
detected, the surviving family member could sue to recover the value
of the test - a few hundred dollars - but not for hundreds of
thousands of dollars to make up for the loss of a loved one.

This bar on suing HMOs spurred a revolt in Congress. Proposals for a
Patient's Bill of Rights, to include a range of patient protections,
were introduced and debated in 1998, 1999 and 2001. But the effort to
rewrite the federal law stalled over the issue of damages suits. While
consumer advocates said victims of shortsighted treatment decisions
deserved the right to sue, insurers and employers said lawsuits would
raise costs and defeat the aim of managed care. If HMOs could be sued
and possibly forced to pay millions of dollars in damages for denying
a treatment, they would be unable to limit health-care costs, the
insurers said.

"If you are going to be threatened with suits all the time, then the
whole system [of managed care] will collapse," said Bokat of the U.S.
Chamber of Commerce.

Leaders of the health-insurance industry thought they had won the
fight in Congress and were surprised to learn they were losing it in
some federal courts.

"I think the lower federal courts are confused. It is a little
discouraging to see them veering off in a new direction," said
Stephanie Kanwit, counsel for the American Assn. of Health Plans.

The industry groups hope the Supreme Court will agree to hear one of
the pending appeals and then rule that the federal benefits law erects
a barrier to all lawsuits in state courts.

But the justices have struggled over the issue. While federal law
governs employee benefits, matters of insurance and medical care are
typically governed by state law.

In the New York case, the U.S. 2nd Circuit Court of Appeals in
Manhattan said the health-care plan's decision to deny Carmine Cicio a
transfusion may have "violated a state law duty of professional care."
If so, the appeals court said, his widow had the right to sue for
damages for this negligent medical care.

In its appeal in Vytra Healthcare vs. Cicio, the managed care network
urged the high court to reverse this ruling and to make clear that
state court juries are not empowered to second-guess the decisions
made by a health-care network.

In the two Texas cases, the U.S. 5th Circuit Court of Appeals in New
Orleans also ruled HMOs can be sued for providing "substandard care"
to patients. Lawyers for Aetna Health Inc. and Cigna Health Care have
urged the court to reverse those decisions.