Health Maintenance Organizations (HMOs) were institutionalized by the signing in to law the Health Maintenance Organization and Resources Development Act by President Richard Nixon in 1973. The idea behind the creation of HMOs was to increase accessibility to healthcare for more Americans by creating a healthcare plan that designed out unnecessary healthcare procedures and treatments thus resulting in affordable plans in terms of insurance costs. HMOs employ two approaches to provide affordable medical care.
The first strategy is to get as many people as possible on board and then use this numerical advantage to negotiate lower fees with specific practitioners. Secondly, the plan seeks to ensure that patients only undergo the necessary medical procedures so that the resultant costs of healthcare for every individual are significantly lower. That enables the HMO to provide more care to more people at lesser costs. Aetna Health Inc. V. Davila Operations of the HMOs have however not been without challenges.
Most of them usually indict their cost minimization strategies citing them as encouraging substandard healthcare provision by their recognized practitioners. The case, Aetna Health Inc. V. Davila, was brought before the US Supreme Court as a consolidated appeal case of two individuals who sued their HMOs for failing to exercise “ordinary care” as provided for in the Texas Health Care Liability Act (THCLA). Background of the case The case before the Supreme Court consolidated two cases namely, Cigna Corp. vs. Ruby R. Calad and Aetna Health Inc.
vs. Juan Davila. The two HMOs, Cigna Group and Aetna healthcare, had been sued by their respective subscribers for not exercising due care in handling their treatments. The suit stemmed from the limitations inherent in the healthcare plans prescribed by the HMOs. Juan Davila had sued filed a malpractice claim against Aetna, claiming that the HMO had refused to cover for a prescription drug, Vioxx that he needed for his treatment. Instead, the company determined that Vioxx was unnecessary and decided to put him on a treatment of generic drugs.
His reaction to the drugs was however negative and he was forced to spend several days in the intensive care unit due to internal bleeding caused by ulcers. In the second case, Calad brought a case against Cigna for sending her home after a complicated surgery against her doctor’s advice. This was after a Cigna affiliated nurse determined that she did not meet the Cigna criteria for continued admission, meaning that the HMO could not continue paying for her continued stay. Legal aspects
The two sides to this litigation were reading from different scripts as far application of the law was concerned. The contest was on whether the Employee Retirement Income Security Act (ERISA) of 1974 or Texas Health Care Liability Act (THCLA) of 1997 would be applied (Cornell University Law School). Application of either legislation would be the determining factor regarding the financial liabilities of the HMOs. ERISA ERISA was enacted in 1974 with the objective of providing a unified approach towards employee healthcare benefit plans.
Within it, there are two important provisions. One is commonly referred to as preemption doctrine, which gives federal laws a prevailing authority in cases where there is conflict between them and the state laws (Cornell University Law School). The second provision relevant to these cases is one relating to damages. It limits the compensation one can get from a denied benefit to the benefit’s value. Texas Health Care Liability Act Passed in 1997, the act adds the responsibility of “ordinary care” to the HMOs.
This law is particularly applicable to the HMOs with regards to their criteria of determining whether medications or medical procedures are necessary. It is designed to prevent lopsided decisions that may favor financial implications of decisions at the expense of a patient’s health. The arguments The two HMOs were for the idea that the Texas law was inapplicable because of the preemptive doctrine while the plaintiffs were of the contrary opinion. The Supreme Court held that provisions within ERISA were sufficient to compensate the plaintiffs.
Effectively, the ruling rendered the Texas state law ineffective because it provides for compensation that contradicts, or appears to supplement ERISA. In terms of judicial precedent, the case gave the federal courts the jurisdiction in cases involving the utilization review. Utilization review is the assessment done by the HMOs to determine the necessity of a medical procedure or medication. The review may sometimes contradict the recommendation of a patient’s personal doctor, and it did in the case of both patients, leading to adverse medical implications.
The ruling handed or reinforced the jurisdiction of federal courts on handling of such matters. On the other hand, the plaintiffs, through their attorneys had argued that the case involved medical decisions and not denial of benefit as would be covered under ERISA. Looking at it from that angle, one would then find the Texas law more applicable because the law stipulates that “ordinary care” should be taken when making the decisions affecting a patient’s health. Its concern therefore, is not how or why the decision was made; it is about the aftereffects of the decision.
Moreover the preemption doctrine could not have been designed to protect practitioners against malpractice law. Implications of the case The case touches on an important aspect of equity. Those covered under the HMO plan appear to have less legal rights than those whose medical plans are not within the preemptive jurisdiction of the ERISA. The act that created HMOs requires that every employer with more than 25 employees provides HMO options that are federally certified to them.
Although they may appear attractive to employees due to their cost saving nature, they have nevertheless come under close scrutiny owing to their expedient utilization reviews. It has the potential of narrowing down to quantity vs. quality question. There is no guarantee that in their quest to keep costs to a minimum, they will not be tempted to compromise the wellbeing of their clients. Matters are not made better by the fact that doctors approved by the HMOs are given incentives to keep medical costs to a minimum (Charatan).
Yet, this ruling appears to have set a precedent that would see the organizations insulated from future litigations arising from malpractices related to HMOs. In arriving at the ruling, the courts may have been guided more by financial considerations than the health implications of the action to the patients. By taking a stand point guided by money, the courts saw the decision arrived at by the HMOs’ utilization review as being more determined by resources available rather than by its health ramifications.
That therefore, gives the organizations more flexibility in determining what kind of procedures to adopt and which ones to avoid. Cheap healthcare is undoubtedly attractive to a majority of Americans, most of who are seeking to maximize the utility of their scarce resources. When people are faced with an option of requiring such discretion, they tend to be vulnerable to mistreatment from haves. HMOs may provide a cheaper healthcare plan in comparison to the others such as the government-sponsored or individual health plans. That notwithstanding, the plan, although cheap, should not act as the weakest link in the healthcare sector.
The precedent set from the ruling of restricting similar litigations to provisions of ERISA makes the possible punishments for them non deterrent. According to ERISA, patients seeking damages from decisions made through utilization review can only be compensated for the benefit denied. That effectively precludes the HMOs from litigations relating to negligence and any other aspect of damages that one would normally seek in such a case. Of importance here is that state laws enacted even after now shall not contradict this unless the law is amended or another precedent is set to the contrary.
For the foreseeable future therefore, the HMOs will continue to use this as a shield against any litigations that will arise out of their utilization reviews. In fact, it is correct to say that the ruling protects the HMOs from accountability because they can mostly be sure that the worst punishment they can get for denying a benefit would be to compensate the patient for it. They only have to ensure that their decision can elicit more financial consideration than medical implications related to it.
Evidently, the law has a shortcoming here because it will most likely fail to deter future occurrences of a similar nature. It just ensures that the offenders keep their faults within a certain understanding and definition. A better opinion can be obtained by looking at matters with a longer term view. If, in future, the HMOs (mis)use ERISA provisions as loopholes for malpractice then the consequences would be too grave to contemplate. It is not fair to place the blame on the judges that delivered the ruling because their duty is to interpret the law; the best place to start would be to reform the ERISA.
It is important to note that ERISA will always remain superior to any state law enacted in an attempt to provide oversight against any malpractices by HMOs and therefore, reformation of the law amendments must start from ERISA. On a more positive note however, the ruling will keep costs of healthcare provided by the HMOs, and by extension other healthcare plans, low. The objective of ERISA was to provide for fair apportioning of benefits and obligations between the HMOs and its clients. Litigation processes are prone to abuse if no limits are placed.
The operations of HMOs mean that they are always exposed to litigations because provision of healthcare is a somewhat subjective exercise. It is possible to get two completely different opinions from two suitably qualified physicians on the same matter, and this is not to say one of them is wrong; they just have different approaches, both of which are acceptable. It then becomes necessary to protect such organizations from frivolous litigations that may be dug out of such differences. It is not hard to imagine how people may abuse open litigations that may be provided by the law.
One of the cost containment measure for the HMOs is the predictability its operations. Without predictability, HMOs will have to provide for uncertainty, which is an extra cost to the healthcare seekers. The law, as it is now, gives them a particular degree of certainty in terms of its utilization review because they do not have to look over their shoulders all the time they make or are about to make their decisions. ERISA may appear to provide an easy escape for those out to minimize costs at the expense of proper care but this might fail to take in to account the fiduciary obligation provision within the act.
Under fiduciary duty obligations, the HMOs are under obligation that in all their dealings with their patients they must always act in good faith. It may not provide a panacea for all the malpractices that may arise from the HMO practices but it does have a much wider scope in terms of obligations. Any disputes arising between the parties to the agreements can always be looked at in terms of fiduciary duties. If parties cannot therefore show that the HMO is in breach of its fiduciary duty obligations then they have no option but to stick to the ERISA provisions in their quest for compensation.
As noted earlier, the judges may have reached their decision guided by the general implications of decisions to the contrary. A few states have enacted legislations similar to the THCLA but have not been able to apply them because of the preemptive doctrine. Had they ruled that the law was applicable, then it would have opened a floodgate of litigations and in addition, it would have given the green light to more states to enact similar laws. This would create inequality in the sense that each of the states would have different settlement criteria for damages.
By upholding the superiority of the ERISA provisions therefore, the judges ensured that there is equity in as far as settlement of HMO disputes is concerned. It may not be fair, but it has an element of equity. Conclusion USA is one of the few developed countries without a healthcare plan that can meet the threshold definition of universal healthcare. This, notwithstanding the fact that the country’s spending on healthcare in relationship to the Gross Domestic Product (GDP) is one of the highest in the world. It simply implies that the costs of healthcare in the country are too high.
Clearly, fewer people have access to healthcare but at a much higher cost. That calls for measures to keep costs low and for that reason, the ruling was timely and relevant. Lower or higher costs within the HMOs will definitely have a ripple effect on other sectors and it is therefore important to ensure that a conducive for cost reduction is created for the HMOs is created. In any case, damages arising from inadequacy of an action of an HMO should indemnify, not compensate the victim, and that is what the ERISA provisions stipulate. ?