Before quitting for the summer, the Supreme Court said Friday it will decide next term whether states can set up independent panels of doctors with the legal power to review the medical decisions of HMOs.
The question is at the heart of the current debate over the patients' bill of rights in Congress.
If lawmakers do not resolve the issue by passing a new law this summer, the justices will take it up when they return to the bench in the fall.
Advocates for patients say the administrators of health care plans should not have the exclusive power to decide what medical treatments will be provided.
HMOs appear to have that authority now. Thanks to past rulings by the high court, patients who are unhappy with their HMOs' decisions cannot sue the plans for damages. The justices have interpreted a 1974 pension law as shielding "employee benefit plans" from being sued.
Undeterred, many states adopted a fallback approach that gives disgruntled patients the right to appeal when their HMOs deny them treatment. Typically, a panel of three doctors is entrusted to review cases. If they agree the treatment was medically necessary, they can order the HMO to pay for it.
Last year, then-Texas Gov. George W. Bush cited his state's independent review board as an example of the right way to balance the rights of patients and the responsibilities of HMOs.
California and 36 other states have adopted these independent review panels. But the legality of the independent review boards has been put in doubt.
Lawyers for the health insurance companies in Texas went to court there to challenge the state's power to establish these boards. They argued that the 1974 federal pension law shielded their plans from state interference.
In June 2000, the U.S. 5th Circuit Court of Appeals in New Orleans agreed, saying the state did not have the authority to oversee HMOs. The appellate judges cited the Supreme Court's ruling that shielded HMOs from all state laws.
In October, however, the U.S. Court of Appeals in Chicago came to the opposite conclusion. The Illinois ruling came in the case of Debra Moran, who had consulted her HMO doctors for severe pain in her shoulders and numbness in her limbs. They recommended physical therapy; she went to a specialist who recommended surgery instead.
When the HMO refused to pay, she had the surgery anyway and later appealed to the Illinois review board seeking compensation for the $95,000 cost of the procedure. But lawyers for her HMO went to court to challenge the review board's authority. They lost when the judge ruled that Moran was simply trying to obtain what her medical plan had promised her.
The Texas and Illinois cases were appealed to the Supreme Court, and the justices announced Friday they will hear the one from Illinois, Rush Prudential HMO vs. Moran, 00-1021.
Meanwhile, the justices voted Friday to take up another property rights case from California. At issue is whether the government must pay compensation to property owners for a temporary moratorium on development. In the past the high court has said that landowners are entitled to payment for a "temporary taking" of their property.
But the courts in California have been reluctant to hit environmental regulators and planning agencies with damage verdicts for the time in which they study a proposed development.
Nonetheless, some landowners at Lake Tahoe say they have an especially strong case. Since 1981, they have been trying to build homes there but have been blocked by the Tahoe Regional Planning Agency.
Santa Monica attorney Michael M. Berger appealed the property owners' case to the high court after the U.S. 9th Circuit Court of Appeals in San Francisco rejected their claim for compensation.
Berger said the California judges have ignored the Supreme Court's past ruling on this issue.
The case is Tahoe Sierra Preservation Council vs. Tahoe Regional Planning Agency, 00-1167.