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Court weighs HMO liability

Posted - Mar. 23, 2004 at 12:20 p.m.



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WASHINGTON, Mar 23, 2004 (United Press International via COMTEX) -- The Supreme Court heard argument Tuesday on whether federal law prevents patients from using state law to sue HMOs that negligently fail to pay for needed medical care, usually in an effort to save money.

Patients often are not able to sue under federal law, leaving state law as their only avenue for relief, if is not pre-empted.

Judging by the responses from the Supreme Court bench Tuesday, HMOs will win the argument and the decision, not patients. Even such liberals as Justices David Souter and Stephen Breyer joined conservatives such as Justice Antonin Scalia to cast doubt on the patients' cause.

A decision in the case will be handed down sometime before the Supreme Court recesses in late June or early July.

The facts in the underlying combined case are simple.

Juan Davila participated in an employee health benefit plan insured by Aetna Health Inc. His physician prescribed Vioxx for arthritis pain, but the HMO insisted Davila try at least two less expensive medications first, according to court records. Several weeks after taking another medication, Davila developed bleeding ulcers.

Davila cannot sue for a "remedy" under the precise wording of the federal Employment Retirement Income Security Act, since his bleeding ulcers no longer make it possible for him to take Vioxx or any other medication by mouth.

Ruby Calad was a member of Cigna Healthcare of Texas Inc. through her husband's employer. After she had a hysterectomy, her doctor recommended she spend several days in the hospital to recuperate. But Cigna's hospital discharge nurse decided a one-day stay would be appropriate, again according to court records.

Calad cannot sue under ERISA either, because she had complications, was re-admitted to the hospital and has recovered.

However, both could recover damages under Texas law. Both sued in state court, but the HMOs successfully moved to have the suits heard in a federal court in Texas, where a judge dismissed the litigation as pre-empted by ERISA -- federal law trumps state law.

However, a panel of the U.S. Court of Appeals for the 5th Circuit said Supreme Court precedent left open the possibility of state negligence suits against HMOs, despite ERISA, if the health organizations committed something more than simple breach of contract.

Tuesday, the Bush administration supported the HMOs in argument before the Supreme Court, while Texas supported the patients.

Washington attorney Miguel Estrada spoke for the HMOs. Estrada was President Bush's choice to fill a spot on the U.S. Court of Appeals for the District of Columbia Circuit -- the second most powerful court in the nation -- but he withdrew his name in the face of Democratic opposition in the Senate.

The 5th Circuit appeals court made the wrong decision in the Texas cases, Estrada told the justices, because the Supreme Court has consistently ruled that section 502 of ERISA is "the exclusive remedy for the denial of benefits."

Estrada was supported by Assistant Solicitor General James Feldman, speaking for the Bush administration.

Fort Worth, Texas, attorney George Young argued on behalf of Davila and Calad. The Supreme Court has ruled to buttress ERISA pre-emption in 2000, 2002 and 2003, but "every time this court has said there is no complete pre-emption," he said.

In both cases HMOs were essentially making medical decisions, he argued, not denying benefits. "A medical decision made is not a payment denial," he added.

Texas Assistant Attorney General David Mattax supported Young in argument. He emphasized that Texas law places the burden on "managed-care entities, not the ERISA (insurance) plan."

But Breyer interrupted him and said the language of the federal statute is plain, "and I don't see how you get around it."

As more and more employees are placed on managed-care plans, the battle lines in the national debate are being clearly drawn.

A number of groups supported the HMOs in friend-of-the-court briefs filed before the argument, including the U.S. Chamber of Commerce and the American Association of Health Care Plans. Groups filing supporting briefs for the two patients included the American Association of Retired Persons, the American Medical Association, the Association of Trial Lawyers of America and consumer groups.

Many of those supporting patients in the continuing coverage dispute with HMOs blame Congress for not amending ERISA to deal with the changing face of medical care.

When ERISA was enacted in the 1970s, HMOs, or pre-paid health plans, were largely a rural or inner city phenomenon designed to provide affordable healthcare, in many cases to the disadvantaged.

Now critics say only a Patients Bill or Rights enacted by Congress and signed into law by the president will remedy the situation.

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(No. 02-1845, Aetna Health Care et al vs. Davila; and No. 03-83, Cigna Healthcare of Texas vs. Calad et al.)

Copyright 2004 by United Press International.

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