High Court Limits Right to Sue HMOs

Patients who are harmed because their managed healthcare plan refused to pay for medical treatment cannot sue the insurer, the U.S. Supreme Court ruled Monday, closing the courthouse door to more than 130 million Americans who rely on coverage provided by a private employer or a labor union.

The 9-0 ruling shields most health maintenance organizations from being sued and possibly forced to pay huge verdicts for their mistakes. However, it leaves the victims of mistaken decisions by an HMO with no real remedy in the courts.

The ruling immediately became fodder for the presidential campaign. It was sharply criticized by Democrats -- including presumed nominee Sen. John F. Kerry of Massachusetts -- and revived demands for a national patients bill of rights, which President Bush has opposed except in a narrow form.

Monday’s decision does not involve claims of malpractice by a doctor. Patients remain free to sue physicians for their alleged mistakes. Nor does it apply to individuals who buy their own healthcare coverage or to government workers.

Many HMOs give plan managers the ability to determine what procedures and services are medically necessary, and thus covered by insurance -- potentially overruling the decisions of a patient’s physician.

During the 1990s, as more employers turned to managed-care networks, the legal status of HMOs became a subject of intense dispute. At least 10 states, including Texas and California, passed laws giving patients a right to go to court if they were denied appropriate or needed care by an HMO.

The Supreme Court’s ruling voids those state right-to-sue laws on the grounds that they conflict with a 30-year-old federal law that governs pensions and benefits.

When Congress passed the 1974 Employee Retirement Income Security Act, known as ERISA, it was hailed by pension reformers because it required companies to honor their promises to workers, regardless of where they relocated. More recently, it has had unintended and unforeseen consequences.

In Monday’s decision, Justice Clarence Thomas said ERISA made the area of employee benefits “exclusively a federal concern” and, therefore, off-limits to the states. Patients can sue under a federal law, but it usually limits awards to minor amounts.

While the ruling resolves the legal dispute, it may well reignite the political battle over the long-stalled patients bill of rights in Congress.

Senate Democrats -- led by Edward M. Kennedy of Massachusetts and North Carolina’s John Edwards -- have insisted that patients should have the right to sue their HMOs. Otherwise, they said, these networks would be free to value cost-cutting more than the health and safety of patients.

“Millions of working people still have nowhere to go when HMO bureaucrats overrule their doctors’ decisions,” Edwards said Monday.

Campaigning in Denver, Kerry said he would push for such a law if elected. “A real patients bill of rights has bipartisan support, and it could become law if the Bush administration was not standing in the way,” Kerry said.

The Texas law voided by the Supreme Court on Monday had been championed during the last presidential campaign by that state’s then-governor, George W. Bush. But it was his administration that took the industry’s side before the high court.

Two Texans had tried to sue their HMOs under the Texas Health Care Liability Act, a measure that Bush allowed to go into effect in 1997 without his signature.

One of the patients, Ruby Calad, was forced to leave the hospital one day after having a hysterectomy -- over the objection of her doctor. She later suffered complications and had to be rushed back to the hospital. She then sued Cigna under the Texas law, claiming that the HMO failed to “exercise ordinary care” when making treatment decisions.

A second patient, Juan Davila, sued the health insurer Aetna after his doctor’s prescription for Vioxx, a painkiller, was turned down and he developed internal bleeding after taking a less-expensive drug.

Lawyers for the HMOs went to the Supreme Court, arguing that the suits should have been dismissed before going to trial. They were joined by administration lawyers, who urged the court to find that all such state lawsuits were “preempted” or blocked by the federal ERISA law.

As president, Bush -- along with other key Republicans -- has balked at allowing open-ended lawsuits, arguing that big-money claims drive up the costs of healthcare, hurting both businesses and employees.

Health insurers echoed that concern Monday. “Today’s ruling by the Supreme Court represents a victory for consumers and employers who otherwise faced the prospect of higher healthcare costs without added benefit,” said Karen Ignagni, president of America’s Health Insurance Plans, a coalition of insurers.

As governor of Texas, Bush took a middle-of-the-road stand on the issue. He said he was not enthused about allowing lawsuits against health insurers and HMOs, and he vetoed one version of a right-to-sue law. But Bush supported a different reform proposal, one that gave patients a right to appeal their claims to an independent panel of outside doctors. Texas, California and all of the other states adopted such “independent review” laws; they were upheld by the Supreme Court two years ago.

Still, Texas legislators wanted to put teeth into the law, so they passed a bill that gave patients the right to sue in state court if their HMOs failed to “exercise ordinary care when making healthcare treatment decisions.” This time, Bush allowed the law to go into effect.

In October 2000, HMOs emerged as an issue in the presidential campaign. During a debate, Vice President Al Gore said that he, unlike Bush, supported a patients bill of rights.

“Actually, it’s not true,” Bush responded. “I do support a national patients bill of rights.... We’re one of the first states that said you can sue an HMO for denying you proper coverage.

“If I’m president,” Bush said, “people will be able to take their HMO insurance company to court. That’s what I’ve done in Texas, and that’s the kind of leadership style I’ll bring to Washington.”

Once in the White House, Bush reiterated his earlier opposition to open-ended lawsuits. He proposed a cap on damages, but the Democrats opposed that limit. They argued that in rare cases of extreme wrongdoing, juries should be permitted to hand down large verdicts. The two sides came to an impasse in 2001.

Trent Duffy, a White House spokesman, said Bush continued to back a patients bill of rights. “The president supports giving individuals a right to sue their HMO as a last resort,” he said. “He would preserve the right to sue, but with reasonable caps on damages.”

ERISA allows patients to bring a claim in a federal court. But critics contend that patients cannot win enough to bother doing so. They can ask only to recover the cost of a benefit found to have been wrongly denied. For example, it could be the cost of a medical test -- perhaps a few hundred dollars. But they may not seek damages for the consequences of a mistaken refusal to approve such a test, which could amount to hundreds of thousands of dollars.

Justice Ruth Bader Ginsburg called on Congress to look at the issue. In a separate opinion joined by Justice Stephen G. Breyer, she said the court had adopted a “cramped construction” of ERISA that deprived true victims of their rights. “A regulatory vacuum exists,” she said, and only a new law can remedy the matter.

Democrats wasted no time in taking up the call.

House Minority Leader Nancy Pelosi (D-San Francisco) joined Kerry, Kennedy and Edwards in blaming the president for blocking a patients bill of rights. “The Republicans’ double-talk on patients’ rights has reached a new low. A right that cannot be enforced is not a right at all. It is just a request,” Pelosi said.

The American Medical Assn. and Families USA, a healthcare advocacy group for consumers, also denounced the court’s ruling as a serious blow to patients’ rights. “This is a sad day for America’s patients and the physicians who care for them,” said Dr. John C. Nelson, the AMA president.

The nation’s manufacturers, drug makers and insurance firms applauded the decision. “Trial lawyers will be chastened to some extent and refrain from wasteful litigation that only drives health insurance premiums higher,” said Quentin Riegel of the National Assn. of Manufacturers.