Supreme Court Hears Opening Arguments in Case on HMO Lawsuits
The Supreme Court on Tuesday heard opening oral arguments in a case related to a 1997 Texas law that allows patients to file suit against HMOs in state court when they experience injuries as a result of administrative decisions related to treatment, USA Today reports (Willing, USA Today, 3/24). In the case, two Texas residents separately filed suit in state court against their HMOs, Aetna and Cigna Healthcare, alleging that the companies made decisions related to treatment that resulted in injuries. In the Aetna case, Juan Davila received a prescription for Vioxx from his physician, but the rules of Aetna Health, a division of Aetna that operated his HMO, required Davila to take two less-expensive medications first. Davila had an adverse reaction to one of the medications that required him to receive care in the emergency department for bleeding ulcers. In the Cigna case, Ruby Calad underwent a hysterectomy, and although Cigna HealthCare of Texas, a division of Cigna that operated her HMO, specified coverage for only a one-day hospital stay, her surgeon recommended a longer stay. A hospital-discharge nurse employed by Cigna did not approve the longer hospital stay, and Calad was readmitted to the hospital several days after her discharge with complications from the hysterectomy. Both Davila and Calad filed suit in state court under state HMO laws (California Healthline, 3/22).
The case could determine whether the Employee Retirement Income Security Act of 1974 preempts state laws that allow patients to file suit against HMOs for administrative decisions related to treatment that resulted in injuries, the New York Times reports. ERISA allows patients with employer-sponsored health insurance to file suit against HMOs in federal court and to sue only for the cost of coverage denied. However, the Texas Health Care Liability Act makes HMOs "liable for damages for harm" caused by a failure to "exercise ordinary care when making health care treatment decisions" (Greenhouse, New York Times, 3/24). In the Texas case, Aetna and Cigna argued that ERISA covered the lawsuits filed by Devila and Calad and had them transferred to Federal District Court in Dallas, which ruled in favor of the companies. However, the 5th U.S. Circuit Court of Appeals in New Orleans in 2002 ruled that Davila and Calad could file suit in state court because the decisions involved both federal law under ERISA and the regulation of medical care, which in most cases is regulated under state laws (California Healthline, 3/22). Ten states -- Arizona, California, Georgia, Maine, New Jersey, North Carolina, Oklahoma, Texas, Washington and West Virginia -- have passed laws that allow patients covered under employer-sponsored plans to file suit against HMOs in state court over administrative decisions related to treatment (New York Times, 3/24).
George Parker Young, an attorney for Davila and Calad, on Tuesday argued that the Texas law establishes a medical standard of treatment and that without the law, HMOs could rely on "the medical necessity of a witch doctor" to make administrative decisions related to treatment (Recio, Fort Worth Star-Telegram, 3/24). "What Texas has done is to fill a vacuum and say we are going to set out a professional medical standard of care when HMOs make medical necessity decisions," Young said (New York Times, 3/24). In a brief to the court, Texas Solicitor General R. Ted Cruz said, "Were Aetna and Cigna to prevail, patients would be left with no meaningful remedy for negligent and wrongful decisions made by HMOs" (Savage, Los Angeles Times, 3/24). Texas Assistant Attorney General David Mattax argued that the Texas law imposes liability on the HMOs for negligent exercise of administrative decisions related to treatment, not on employers. "We will regulate that as a separate duty, separate and apart from ERISA," he added (New York Times, 3/24). Mattax also said that unlike in 1987, when the Supreme Court ruled that ERISA precluded state lawsuits against employee benefit plans, "HMOs are making medical decisions" today (Lane, Washington Post, 3/24). "The state merely attempts to regulate medical decisions by HMOs," Mattax said (USA Today, 3/24).
However, James Feldman, assistant to the U.S. Solicitor General, argued that the Texas law and similar laws in other states could end the "very careful balance" that Congress reached with ERISA. Feldman said that Congress passed ERISA to provide a limited system of liability to "encourage the formation of managed care plans," the New York Times reports. "To allow states to essentially say, as the state has said here, 'Well, we're going to provide an additional remedy that Congress rejected when it drew that careful balance' would be to completely undermine Congress's decisions about how this system should be structured," Feldman added (New York Times, 3/24). Miguel Estrada, an attorney for Aetna and Cigna, said that Congress passed ERISA to prompt employers to make "these kinds of tough decisions," the Dallas Morning News reports. Employers can afford to provide health insurance to employees only with the assurance of "limited liability under predictable standards," Estrada said (Pusey, Dallas Morning News, 3/24). "This is about a bargain with employers," he added (Los Angeles Times, 3/24). Estrada also said that patients can challenge the administrative decisions of HMOs related to treatment in venues other than state court, the Houston Chronicle reports. Estrada said that patients can appeal to the health insurers that operate the HMOs, request an external review or file a federal lawsuit (Reinert, Houston Chronicle, 3/23). Both attorneys also argued that laws that allow patients to file suit against HMOs in state court increase the cost of health care and increase costs for employers, the Los Angeles Times reports (Los Angeles Times, 3/24).
A majority of the Supreme Court justices "seemed cool" to arguments in support of the Texas law, the Morning News reports. Justice Stephen Breyer agreed with Justice Sandra Day O'Connor that the new challenge to ERISA is not substantially different from the 1987 case (Dallas Morning News, 3/24). "I really thought the train had left the station," O'Connor said in reference to the 1987 decision (USA Today, 3/24). Breyer said that state lawsuits "seem to be the thing this (federal) statute forbids, and I don't see a way around it" (Washington Post, 3/24). Justice David Souter said that he found a "strangeness" in efforts by Texas to regulate HMOs as they regulate physicians (Dallas Morning News, 3/24). Justice Antonin Scalia said that under the Texas law, HMOs that deny coverage for treatment "would be subject to appeal" and "would be liable for damages" (Fort Worth Star-Telegram, 3/24). Scalia also said that HMOs are "not managing care. They're giving out money" (Los Angeles Times, 3/24). He added, "All they're doing is looking at bills and saying, 'Do we owe any money?'" (Dallas Morning News, 3/24). Chief Justice William Rehnquist also said that HMOs do not make decisions on treatments. He added, "Their statement is they just won't pay for it" (Washington Post, 3/24). However, Justice John Paul Stevens said that HMOs "are making medical decisions" when they inform patients that will not pay for additional days in the hospital (Los Angeles Times, 3/24). Stevens also said that he is "uneasy with the federal patient appeals process as described by Mr. Estrada" because "it seems inadequate" for patients who require "a quick response" to coverage denials, the Morning News reports (Dallas Morning News, 3/24). The Supreme Court is expected to rule on the case by July, USA Today reports (USA Today, 3/24).
After the Supreme Court heard the arguments, Sen. Edward Kennedy (D-Mass.) and Rep. John Dingell (D-Mich.) appeared with Young in support of the Texas law, the Morning News reports (Dallas Morning News, 3/24). Kennedy and Dingell said that regardless of the Supreme Court decision, Congress would "step in and revive federal patient rights legislation," CongressDaily reports (Heil, CongressDaily, 3/23). Congress did not pass ERISA "to be used to interfere with a patient's right to quality health care," Kennedy said, adding, "Whom do you trust to make health care decisions for you -- your doctor or an HMO bureaucrat? That's what this case is all about." Ron Pollack, president of Families USA, said that the Supreme Court might may rule in favor of the Texas law, adding, "What you see in court isn't necessarily what you get when a decision comes out" (Fort Worth Star-Telegram, 3/24). Trent Duffy, deputy White House press secretary, said that President Bush has taken a position on the cases that is "compatible" with his position as governor of Texas (Los Angeles Times, 3/24). As governor of Texas, Bush allowed the Texas law to pass without his signature (New York Times, 3/24). "The president's principles are for allowing patients a fair process for challenging the decisions of health insurers without needlessly driving up health care costs," Duffy said (Los Angeles Times, 3/24).
Several broadcast programs reported on the case:
- CBS' "Evening News": The segment includes comments from Calad and Young (Andrews, "Evening News," CBS, 3/23). The complete segment is available online in RealPlayer.
- NBC's "Nightly News": The segment includes comments from Calad; Dingell; Karen Ignagni, president of America's Health Insurance Plans; and Young (Williams, "Nightly News," NBC, 3/23). The complete segment is available online in Windows Media.
- NPR's "All Things Considered": The segment includes comments from Calad, Dingell, Estrada and Kennedy (Totenberg, "All Things Considered," NPR, 3/23). The complete segment is available online in RealPlayer.