Supreme Court ruling a setback for patients' rights

Patients and physicians wonder if managed care will be magnanimous in victory.

Posted July 19, 2004.

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What a difference two years can make. In June 2002, physicians and patients were applauding a U.S. Supreme Court ruling upholding an Illinois law that created an independent review system for cases in which a treating physician and a patient's health plan disagree on what is medically necessary for the patient.

With similar laws on the books in 41 states and the District of Columbia, the 5-4 ruling was a significant legal victory over managed care companies.

In those heady days it would have been hard to imagine that 24 months later the court would deal patients' rights advocates such a blow. Patients and physicians are now forced to fall back on that victory for recourse following this major setback dealt to them by that very same Supreme Court.

Last month the high court struck down a landmark Texas law, the Texas Health Care Liability Act, that allowed patients to sue their health plans in state court for damages incurred when plans refused to pay for doctor-recommended treatments.

In a unanimous decision, the court ruled in June that the federal Employee Retirement Income Securities Act of 1974 preempted the Texas law and others like it in 10 states. The ruling is bad news for some 140 million people who receive their health insurance through employer-sponsored health plans covered by ERISA. Patient advocate groups, including the AMA, were quick to register their disappointment.

The Association noted that the decision eliminated state legal accountability for managed care plans that alter, delay or deny physician-recommended treatment. It added that the decision will allow managed care plans to practice medicine without a license and without the accountability that physicians face every day.

The patients in the two cases before the court -- Juan Davila and Ruby Calad -- were seeking just such accountability. Davila alleges that he developed bleeding ulcers and almost died after Aetna Health Inc. required him to try two different drugs on its formulary before it would pay for Vioxx, the drug he had been taking without complications. Calad sued CIGNA Healthcare of Texas Inc. after the insurer denied the longer hospital stay her physician recommended following her hysterectomy. She ended up in the emergency department several days later with complications.

Davila and Calad argued that their health plans should be forced to defend their actions in state court because those actions were, in effect, the practice of medicine, which would not be preempted by ERISA. The AMA, in a friend-of-the-court brief, sided with Davila and Calad.

But the Supreme Court agreed with the health plans that claimed that they were making plan coverage determinations, not medical decisions.

The ruling leaves patients with a couple of options for recourse -- neither ideal. The first is the cost-prohibitive strategy of suing their health plan in federal court where they would be limited to recovering reimbursement for the denied benefit. Or they can take their case to independent review, since that very right was upheld by the Supreme Court last year. It should be noted that health plans are only required by the court's ruling to offer this option to the patients in health plans that carry the risk. More than 50 million patients are covered by self-funded plans not included in the court's ruling. An independent review victory is also limited to the cost of the denied treatment.

Managed care plans believe that independent, external review is a viable alternative to the right to sue in state court. Patients and physicians have every reason to be skeptical.

Physicians remain obligated, as always, to recommend the best treatments for their patients. Meanwhile, the high court's ruling has created a high-stakes test of whether the past two years have taught managed care plans anything new about their proper role.

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