updated 3/23/2004 3:49:25 PM ET 2004-03-23T20:49:25

The Supreme Court stepped into the argument over protection for HMO patients on Tuesday, and justices seemed unpersuaded that patients with a beef against their health plans should be able to collect large damage awards.

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A majority of the nine justices seemed to agree with the insurance industry that HMO patients like Ruby Calad have other options, and cannot sue their health plans in state courts, where juries are often generous to a sympathetic victim.

Calad claims Cigna Healthcare of Texas refused to pay for necessary medical care, and essentially evicted her from a Houston hospital after only one day of recovery from a complicated hysterectomy operation.

She was back in the hospital a few days later, suffering complications she claims could have been avoided had she remained in the hospital.

State or federal courts?
Insurers want to move cases like Calad’s into federal court, where judgments against insurers result in relatively little or no money, and claim that a federal law and previous Supreme Court rulings require that course.

Patients in Calad’s position could appeal an HMOs decision internally, pay for the additional medical care themselves or sue someone else — a doctor, or a hospital most likely — several justices suggested Tuesday.

Calad’s lawyer calls hers a “classic HMO horror story,” but the legal question for the Supreme Court is not whether Calad’s HMO negligently pinched pennies five years ago. In deciding where suits like Calad’s belong, the court will examine whether states can improvise their own patient protection laws to deal with the growth of managed care.

The prevailing federal law on the subject dates to 1974, before HMOs such as Calad’s were such a dominant feature of American health care. Congress has tried and failed to pass national patient protection legislation since, but numerous states have passed laws like one passed in Texas in 1997 that are intended to make insurers accountable for their treatment decisions.

Those laws generally give a patient the right to sue in state court, as both Calad and another patient, Juan Davila, did.

Limiting malpractice awards
Davila is a post-polio patient given what he claims was inferior but cheaper pain medication, instead of the Vioxx drug his doctor had recommended. The cheaper medication caused bleeding ulcers, and he almost had a heart attack, Davila said.

That doesn’t mean Davila’s Aetna Health plan should be on the hook for fat malpractice awards, justices suggested.

“All the HMO said was, 'under the plan ... we don’t have to pay for Vioxx, and if you want Vioxx buy it yourself,”’ Justice Antonin Scalia said. “All you’re talking about is money.”

In both cases, an insurer tried to move the lawsuit to federal court, where under the 1974 Employee Retirement Income Security Act a patient may receive no more than the value of whatever benefit the HMO did not provide. There are no hefty jury awards for punitive damages.

The insurers said Calad and Davila should have contested denial of their claims under ERISA, but a federal appeals court in 2002 ruled that Calad and Davila could instead sue for malpractice damages in state court. The HMOs appealed to the Supreme Court.

Patient and state rights shortchanged?
Insurers, backed by the Chamber of Commerce and others, argued in court filings that ERISA has its own procedures for reviewing or appealing coverage decisions, and that sidestepping the federal law would lead to more lawsuits and drive up health care costs.

On the other side, trial lawyers, medical organizations and numerous states argued that states should have the right to hold HMOs accountable if treatment decisions shortchange patients.

Texas and nine other states regulate HMOs in making decisions about whether treatment is medically necessary, state attorneys general backing Calad and Davila argued in a friend of the court brief. Other states have passed some form of consumer protection from HMO decisions, and still more states are considering such laws, the state lawyers wrote.

Arizona, California, Georgia, Louisiana, Maine, New Jersey, Oklahoma, Washington and West Virginia have laws similar to Texas.

The cases are Aetna Health Inc. v. Davila, 02-1845 and Cigna Healthcare of Texas Inc. v. Calad, 03-83.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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