Medicare patients win major protections against HMOs Federal appellate ruling says abuses violate constitutional rights


WASHINGTON -- A federal appeals court has ruled that Medicare patients are entitled to immediate hearings and other protections when they are denied care by health maintenance organizations.

In ruling on a nationwide class action suit, the court said that many HMOs had failed to provide adequate explanations for the denial of benefits and had failed to inform patients of their appeal rights.

The decision, issued Wednesday by the 9th U.S. Circuit Court of Appeals in San Francisco, was a major victory for consumers.

The lawsuit was filed in Arizona on behalf of nearly 6 million Medicare patients in HMOs around the country. The opinion, for a unanimous three-judge panel, was written by Judge Charles Wiggins, a former Republican congressman from California.

For the past seven months, Congress has been engaged in bitter debate about whether to guarantee similar rights for more than 150 million Americans with private health insurance. The White House has repeatedly denounced Republicans and HMOs for resisting President Clinton's demand for a "patient's bill of rights."

But the appellate court said that in running the Medicare HMO program, federal officials had not lived up to their duty to guarantee "due process of law," as required by the Fifth Amendment to the Constitution.

Indeed, it said, Medicare officials have failed to enforce their own rules and have improperly renewed contracts with HMOs that violated the rules.

Wiggins said Medicare beneficiaries were entitled to due process because the HMO decisions amount to "government action." HMOs are private corporations, but when they deny services to Medicare beneficiaries they act "as a governmental proxy" and they are "federal actors," the court said.

"The government cannot avoid the due process requirements of the Constitution merely by delegating its duty to determine Medicare coverage to private entities," it said.

Other courts have reached similar conclusions in cases involving Medicaid, the federal-state program that provides health care for poor people.

The decision on Medicare is significant because it holds that beneficiaries have important rights that are rooted in the Constitution, not merely in statutes or regulations subject to change by Congress and the president.

The number of beneficiaries in HMOs is rising rapidly and is expected to reach 10 million, or 25 percent of the Medicare population, by 2002.

The Clinton administration and the HMO industry had argued that HMOs serving Medicare patients were private entities and that the federal government should not be held responsible for their decisions.

"The decisions of the HMOs are not government action," the secretary of Health and Human Services, Donna E. Shalala, asserted in court papers.

"We absolutely believe in a strong, independent appeals process, and we have taken steps to strengthen the appeal rights of Medicare beneficiaries," said Melissa Skolfield, a spokeswoman for the Department of Health and Human Services. "But we have concern about the judge's finding that private HMOs should be treated as if they were the government."

The plaintiffs filed suit in 1993 and won a favorable ruling from the U.S. District Court in Tucson, Ariz., in October 1996. Shalala then appealed, saying that Judge Alfredo Marquez had usurped her authority.

Pub Date: 8/14/98

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