Medicare Patients Can Sue HMOs, State Supreme Court Rules

California Medicare+Choice beneficiaries can sue their health plans in state court for denying "necessary but expensive medical treatment," the California Supreme Court ruled in a 5-2 decision yesterday, the Los Angeles Times reports. In the case, George McCall, a Costa Mesa man who had an inherited form of emphysema, alleged that PacifiCare of California, the state's second largest managed care plan, and his physician group, Greater Network Physicians Inc., had refused to refer him for a lung transplant. His doctors had told him they would not refer him until he dropped out of the HMO and "relied fully on Medicare, which covers the full cost of such transplants," the Times reports. According to McCall's lawyer Carol Jimenez, McCall's doctors referred him for a transplant only after he dropped out of the HMO because at that point they "got paid every time they saw him and did not have to pay for any of the care for which he had been referred." McCall, who lived on a ventilator for nearly two years before receiving a transplant, died shortly after the procedure. McCall's suit alleged negligence, willful misconduct, fraud, negligent and intentional affliction of emotional distress and unfair business practices.

Similar suits filed in California had been dismissed "on the grounds that federal law requires these complaints to be filed in an administrative proceeding established by Medicare law," the Times reports. But writing for the court majority, Justice Kathryn Mickle Werdegar said that although federal Medicare law established an administrative system for patient complaints, it does not specifically prohibit lawsuits in state court. She added, "We presume that in enacting laws, Congress does not intend to preempt state regulation of the same subject matter unless a contrary intent is made clear." Jimenez said, "This decision could not be better for Medicare beneficiaries. It means that their HMOs can't deny care and escape the consequences" (Dolan, Los Angeles Times, 5/4). Jimenez added, "This brings California in line with all of the federal courts and the rest of the country" (Kravets, AP/San Diego Union-Tribune, 5/3). The Times reports that most other states have allowed Medicare beneficiaries to bring similar suits in state court.

The court's two "most conservative members" said that the Medicare law provides a "careful administrative program for handling complaints." In the dissenting opinion, Justice Marvin Baxter wrote that the system "is designed to provide that coverage decisions are reviewed in a thorough and expeditious manner," even though it "may not afford the range of relief available under state law." Baxter added, "Today's decision all but assures Medicare administrative review process will cease to function as a meaningful limit on judicial review." PacifiCare and its lawyers agreed with the dissenting opinion. In a statement, PacifiCare officials said, "[W]e are concerned that the efficiency and integrity of the (Medicare) program's administrative review process will be compromised." PacifiCare attorney Jon Manzanares said, "The concern is: Do we want to have a situation where the Medicare process is bypassed and is replaced with what we believe is unnecessary litigation?" (Los Angeles Times, 5/4). He added that the decision is "ripe for review" by the U.S. Supreme Court (Freudenheim, New York Times, 5/4).