The Los Angeles Times

WASHINGTON — Patients whose health maintenance organizations deny them a medical treatment or drug benefit have a right to a second opinion from outside doctors, the Supreme Court ruled Thursday, upholding the new “independent review” laws in California and 41 other states.

The 5-4 decision endorses a middle-ground reform in the continuing fight between consumer advocates and the health insurance industry about who should make medical decisions.

For many patients, the independent review system promises a quick and reliable answer to the question of whether a medical treatment is wise and necessary.

If they appeal to a state board, then a medical specialist or a panel of three doctors will review their case. If they agree that the treatment or drug is needed, the board can force the HMO to pay for it.

But many patients are unaware of the review system, and relatively few have taken advantage of it.

California’s review system was launched in January 2001, and the Department of Managed Health Care in Sacramento said it had handled the claims of more than 800 people.

In roughly two-thirds of those cases, the outside doctorssupported the HMOs’ original decisions. In the remainder of cases, the doctors sided with patients and persuaded the HMOs to provide the benefit or ordered that it be paid.

Daniel Zingale, the director of the state agency, said the system
operates on the premise that “patients want to see a doctor, not a lawyer. They want the care before the damage is done, rather than suing after the fact.”

In Thursday’s ruling, the high court retreated somewhat from earlier rulings that had shielded HMOs from virtually all state laws.

In 1987, the court ruled that the federal law regulating employee
benefits did not allow states to require employers to add more benefits. If employees could sue in state court over a medical benefit, that would violate the federal rule by forcing employers to pay more, the court said.

This ruling loomed large in the 1990s, when most employers decided to insure their workers through managed care plans, which were designed to hold down costs for employers. Sometimes, the plans would not pay for treatments, including those for sick children.

Outraged, patients learned that they could not sue their HMOs because the insurers were shielded by the federal law.

As public anger grew, state and federal lawmakers looked for a better way of protecting patients.

Congress took up a patients’ bill of rights, which would have overturned the Supreme Court’s opinion and allowed patients to sue their health-care providers, but that legislation has stalled.

Meanwhile, many states adopted the independent review system. State officials contended that because it does not involve a lawsuit against an HMO, it did not conflict with the federal benefits law.

Health-care insurers disagreed, and they mounted a major attack on the independent review laws. They argued that, in essence, states were trying to regulate employee benefits and force companies to pay more.

In Texas, the U.S. Court of Appeals struck down the independent review system, which had been championed by then-Gov. George W. Bush.

In Illinois, however, an appeals court upheld the state’s law and
described it as a regulation of insurance, not employee benefits.

The justices took up the dispute in the Illinois case and also upheld the state’s law.

Justice David H. Souter said the state law simply gives patients the medical benefits they have been promised.

Moreover, states have had a long tradition of regulating insurance, and that does not conflict with the federal benefits law.

In the Illinois case, Debra Moran of suburban Chicago, began experiencing pain and numbness in her right shoulder in 1996. She tried exercise therapy at her doctor’s suggestion, but the pain worsened.

Moran learned of a Virginia surgeon who had had success with an
experimental nerve surgery. Her doctor approved of the surgery for her, but Rush Prudential HMO, her insurer, refused to pay for it.

Undaunted, she had the operation, paying the $95,000 herself. She then appealed the claim to the state board under the terms of a new and relatively untested HMO law giving patients the right to a “timely review” by an outside doctor.

A specialist at Johns Hopkins University Medical Center in Baltimore reviewed the case and determined that the treatment was medically necessary.

Nonetheless, Rush Prudential refused to pay her claim, and sued in federal court to challenge the state law.

In Rush Prudential HMO vs. Moran (00-1021), the high court sided with the patient and said the state had the power to order the claim paid. Joining Souter were Justices John Paul Stevens, Sandra Day O’Connor, Ruth Bader Ginsburg and Stephen G. Breyer.

In dissent, Justice Clarence Thomas said the ruling destroys the uniform federal regulation in this area and predicted that it would lead to higher costs for business.

In Washington and in California, experts disagreed about whether the ruling will boost the demand for a patients’ bill of rights, or defuse it.

“It doesn’t give patients anything new, but it protects what we have,
which isn’t enough,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

Other consumer advocates noted that state laws give no protection to the 56 million Americans whose health plans are self-insured, and not truly insurance.

Sen. Edward M. Kennedy (D-Mass.) and Rep. Charlie Norwood (R-Ga.), the sponsors of the federal patients’ bill of rights, said the ruling highlighted the need for a national law.

“State reviews are not a substitute for strong federal action,” Kennedy said, as patients cannot be compensated if they or a loved one dies or suffers greatly because a treatment was delayed or denied.

Leaders of the health-insurance industry say they have supported
independent reviews of medical decisions, but they oppose putting this requirement into state or federal laws.

“Legislation creates new requirements and more lawsuits at a time when health-care costs are exploding,” said Karen Ignani, president and chief executive of the nation’s largest HMO trade group, the American Assn. of Health Plans. “We don’t want the health-care system to unravel.”

The Health Benefits Coalition, which represents 3 million employers, agreed, saying the court’s decision makes it more crucial than ever to block federal legislation “that would increase health-care costs further.”

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Times staff writer Don Lee in Los Angeles contributed to this report.