Medicare patients allowed to sue HMOs

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Top state court rules in denial-of-care case

The San Francisco Chronicle

In a major victory for 1.5 million Californians, the state Supreme Court ruled yesterday that Medicare beneficiaries can sue health maintenance organizations for damages when they are denied adequate care.

By a 5-to-2 vote, the court rejected an HMO’s claim that beneficiaries are limited to administrative relief and cannot turn to the state courts.

The decision allows the family of an Orange County man who suffered from a degenerative lung disease to sue PacifiCare Health Systems for allegedly refusing to refer him to a specialist or a transplant program.

“This is a landmark decision,” said Carol Jimenez, the Los Alamitos attorney for the late George McCall and his wife, Barbara, who sued PacifiCare. “This opens the floodgates for people with Medicare to sue their HMOs.”

In 1998, a state appeals court had ruled that the federal Medicare Act prevented beneficiaries from suing HMOs.

But yesterday, the state’s highest court said that in passing the Medicare Act, Congress did not intend to prevent beneficiaries from suing.

“Congress left open a wide field of operation for state law pertaining to standards for the practice of medicine and the manner in which medical services are delivered to Medicare beneficiaries,” wrote Justice Kathryn Mickle Werdegar in the majority opinion.

She noted that the Medicare administrative review process covers “a limited class of claims,” primarily relating to reimbursement disputes. She said it does not cover claims relating to the quality of care.

Justice Marvin Baxter dissented, saying that the decision undermines Medicare’s administrative review process, which he said gave patients an efficient and expert review of any complaints. Justice Janice Rogers Brown joined in Baxter’s opinion.

Barbara McCall called the decision “bittersweet” because her husband died two years ago. “It’s not going to bring my husband back,” she said. “But if it makes one person more aware of how the HMOs control the medical system, it will have been worth all the work and effort.”

Jimenez said that the ruling is consistent with federal decisions around the country that have allowed Medicare beneficiaries to sue in state court. “California was an anomaly,” she said.

“This is a big win for HMO patients,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica. He said that the court is allowing people to sue even when there is an administrative review available. “The industry had really tried to close themselves off from liability,” Court said.

He said Medicare beneficiaries will be able to take advantage of a new state law sponsored by his group that allows patients to sue HMOs for denial of adequate health care.

Jon Manzanares, the lawyer for PacifiCare, said that his client was disappointed with the decision and he did not rule out filing an appeal with the U.S. Supreme Court.

He said that patients can get immediate relief through the administrative process, unlike the court system, which can drag on for years.

George McCall, who suffered for years from a degenerative lung disease, filed suit in 1997, charging that PacifiCare for more than 12 years repeatedly refused to refer him to a specialist, put him on a lung transplant list or provide other needed care. He was forced to end his membership in the HMO and ultimately received a lung transplant paid for by Medicare.

Barbara McCall said the doctors told her husband that a lung transplant would probably not be successful because most patients with his disease die.

“My husband trusted them,” she said. “He was an honest man and he thought they were, too.”

A trial judge threw out McCall’s suit. But a state appeals court reinstated the complaint, saying his suit was not precluded by the federal Medicare Act.

McCall died just before the appeals court ruling came out. Meanwhile, a federal appeals court ruled in 1996 that patients could sue in state court. But the following year, the state appeals court in San Jose ruled the other way, saying Medicare beneficiaries were limited to administrative relief.


The ruling

  • What the court did: The California Supreme Court ruled that Medicare beneficiaries can sue health maintenance organizations in state court for denying adequate health care.

  • Who’s affected: The decision will affect 1.5 million beneficiaries in the state who are covered by an HMO.

  • The reasoning: The court said that the Congress did not intend to prevent beneficiaries from suing in state court when it passed the Medicare Act, which sets out an administrative review for complaints.

  • What it means: “This opens the floodgates for people with Medicare to sue their HMOs.”

    — Carol Jimenez, attorney.

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