Ruling on HMOs Expands Rights of Medicare Patients

Medicare patients who are denied medical treatments by HMOs must be given a hearing, and the federal government must ensure that all such patients are fully informed of their rights, the federal appeals court in San Francisco has ruled.

Health maintenance organizations that fail to provide fair hearings to their patients would lose their Medicare contracts under the ruling by the U.S. 9th Circuit Court of Appeals, which has jurisdiction over nine Western states, including California.

The court’s decision is “very significant,” said Patricia Smith, senior health lobbyist for the American Assn. of Retired Persons. The ruling means that the government “must be aggressive in its oversight of health plans and must carefully monitor the kind of care that people get,” Smith said.

Medicare “has the responsibility to go in and oversee plans and make sure they live up to the law.”

In recent years, the government has been trying to move more Medicare patients into HMOs, hoping to hold down the cost of the government’s largest health program, which covers medical bills for most Americans older than 65.

But as in the private sector, the moves have been accompanied by complaints that HMOs are improperly denying care to patients. In the case of Medicare, the denials are frequently made on the grounds that a procedure a patient has requested is not covered by the Medicare law.

The current case began in 1993 when a Tucson, Ariz., organization called the Center for Medicare Advocacy Inc. sued the government on behalf of five elderly women who alleged that their health plans had turned down their requests for medical care. One of the women suffered from diabetes and eventually had her leg amputated after her health plan ignored her complaints of pain in her foot, she claimed.

The federal district court in Arizona that originally heard the case expanded it into a nationwide class action, meaning that the court’s ruling potentially could affect Medicare beneficiaries in all states.

The court’s ruling does not determine what benefits a health plan must offer elderly patients. Instead, it covers the procedural rights those patients have.

Federal law provides an elaborate series of protections for Medicare patients who feel that they have been improperly denied care by an HMO. But patient advocates have complained that many health plans fail to tell patients about those rights. Moreover, the advocates have argued that Medicare officials have improperly taken a hands-off attitude, saying that the government was not responsible for how health plans respond to patient complaints.

The appeals court rejected any such argument.

“We find that HMOs and the federal government are essentially engaged as joint participants to provide Medicare services,” appeals court Judge Charles Wiggins wrote for the unanimous three-judge appellate panel. HMOs “are making decisions as a governmental proxy.”

The court’s decision was released Wednesday but received little notice in Washington until Thursday.

Under the court’s ruling, which upheld a previous order by District Judge Alfredo C. Marquez in Arizona, health plans will be required to provide a hearing to any patient who feels that he or she has been improperly denied care. The health plan will have to provide patients a clear statement of why services have been denied as well as written notice to all patients of their rights. To ensure that the notice will be meaningful to elderly patients, the court specified that it be printed in large-size type.

Moreover, the court ruled that the government must enforce a provision in the Medicare law that prohibits Medicare from “entering into new contracts with HMOs that fail to provide the procedural protections mandated by the court.”

The law provides patients a series of rights, the court noted, but those are undermined if health plans are allowed to keep patients in the dark.

“The appeal rights and other procedural protections available to Medicare beneficiaries are meaningless if the beneficiaries are unaware of the reason for service denial and therefore cannot argue against the denial,” Wiggins wrote.