Prepared by Mary Anderlik, Researh Profesor, Health Law and Policy Institute,
and Wendy Wilkinson, Attorney and Project Director, Southwest DBTAC, ILRU

Managed care organizations (MCOs) provide an array of services as defined in a contract to a group of individuals for a set fee, negotiated in advance. Typical arrangements include:

• Capitation payments for each individual enrolled.

• Limited network of providers.

• Use of primary care physician as "gatekeeper" to specialty and other services.

• Utilization review.
• Prior authorization for services.

Managed care can be good or bad for people with disabilities, depending on the details of implementation. Community Medical Alliance in Boston is one of the success stories. Dr. Robert Master and colleagues have identified seven principles for designing care systems to meet the needs of people with disabilities: (1) develop new clinical roles that integrate true case management and clinical decision-making; (2) maximize the accessibility of clinicians who know the patient; (3) create environments that foster strong personal relationships between patients and clinicians; (4) help clinicians provide services in the most appropriate settings, deploying resources flexibly to support this activity; (5) employ clinicians with special knowledge of patients’ conditions; (6) use early interventions aggressively to limit the complications of chronic illness; and (7) use risk-adjusted capitation to allow innovation in serving people at varying levels of need.

Where managed care isn’t working, the overarching problems tend to be: (1) bureaucratic rigidity; (2) system complexity and lack of follow-through; (3) inadequate resources; and (4) inadequate training of staff.

• Augmentative communication devices (general access problem, and also getting details right like gender of voice).
• Motorized/customized wheelchairs.

"One medical director testified under oath that he would never approve a power wheelchair for an individual where there was someone who could push them. If there was nobody in the home they would try to find somebody in the community. He thought this was integrating the person more into the community." (Lawyer with P&A)

• Provision of behavioral health care.

• Supply of medications pending resolution of disputes.

• Access to new generation anti-psychotic medications (especially as first-line therapy).

• Day treatment: HMOs terminating as not medically necessary versus creating less intensive services that meet need or allowing period of transition into other services.
• Specialists as PCPs.

"My [primary care physician] is relatively new.... Once he got done writing down every physician we had seen, who had quit, who is taking over...he had the length of the table written.... He had the whole thing and he tears it off and he looked and he said, ‘Oh my God, who is helping you?’ I said, ‘You are!’ He just had this look of fear and panic in his face." (Mother with child with a disability)

• Often comes down to an issue of who pays, the Medicaid program or the doctor.

• Denial notices not provided reliably and/or content is uninformative.

• Preauthorization for surgery.

• Payment for innovative procedures that minimize disability and may only be available at a single (out-of-state) medical center.

• Home health care.
• Diapers, nutritional supplements, and similar supports.
• Absence of care coordination, despite promise of "case management."

• Always start by reading the member handbook – know your rights, know the "magic words" you need to use to get what you want.

• Use the plan’s toll-free number for consumer assistance. At a minimum, get them to help you understand your rights and responsibilities (if the member handbook is unclear) and the reasons for any policies/decisions that affect you.

• Contact an advocacy organization.

• Contact state agencies—many have toll-free numbers and require that these numbers be included in member handbooks.

• Make a record of any problem you experience while it is still fresh in your mind.

• For any contact, note the date, who you talked to, and what you were told.

• If you wait, you may lose your right to file a grievance or appeal.

• The process can be intimidating, and people aren’t always as helpful as they should be. That’s why it is important to be clear about your objective (why the effort is worth it), and to use whatever help is available.

• Statistics released by states indicate that plans reverse about 30-40% of denials upon internal review. (Independent review results in a decision for the consumer in about 40-60% of cases.)

• Individuals in the public system generally have more serious disabilities. They also face additional barriers such as poverty and have less access to the tools needed to negotiate through the complex health care maze, than the privately insured population. The federal and state governments have some responsibility for the provision of services. However, the guidance provided through the legislative mandates governing these systems is often unclear.

• The Medicaid Act has been used on its own and with the ADA and Section 504 to challenge health care decisions and practices that discriminate against people with disabilities. Its baseline requirements and procedural mandates can be used to assure that individuals with disabilities receive the treatment, equipment and services they require. The Act has:

• Fair hearing requirements to assure that people get full and fair consideration of any denial of a claim (and aid-paid-pending resolution of a dispute).
• A "reasonable promptness" clause that can be used to spur on MCO decision making processes.
• Requirements for adequate written notice of decisions related to coverage.
• Medical necessity criteria for home health care providers and assistive technology.
• Comparability provisions – to assure that individuals with disabilities are not discriminated against on basis of severity of disability.

Carter v. Belshé (Cal. Super. Ct. Sacramento County filed Jan. 30, 1997)

In this case brought by the California P&A and others against the state Medicaid agency and CalOPTIMA, an MCO created to implement Medicaid managed care in Orange County, the petition includes several causes of action under the Medicaid Act:

• failure to monitor CalOPTIMA and its contractors
• failure to provide timely written notice of action and of right to state fair hearing
• failure to explain right to aid paid pending hearing
• denial of medically necessary care
• failure to provide services with reasonable promptness
• violation of federal comparability requirements

• "Medically necessity" criteria set the standard for what the MCO must provide. Medicaid law requires that states develop some guidelines regarding the provision of medically necessary services. They have some latitude in crafting the definition. What this definition should encompass has been the subject of much debate and litigation. Most of the decisions support physician judgment.

Olmstead v. L.C., 119 S.Ct. 2176 (1999)

• Failure to receive services in a community-based setting violated Title II of the ADA which requires that public entities provide their services "in the most integrated setting appropriate to the needs of qualified individuals with disabilities…". In a setting that "enables individuals with disabilities to interact with non-disabled persons to the fullest extent possible." The setting must be appropriate to the needs of an individual and could include home and community-based arrangements.
• The extent of the obligation to make a community placement may be modified by Title II’s "fundamental alteration" defense.
• In applying it to this situation, the Court said a state may consider not only the cost of providing community-based care to individuals, but also the range of services it provides to other individuals with disabilities and the state’s obligation to mete out those services in an equitable manner.

In re J Curtis H (Cal. DHS, Sept. 4 1998)

• As ordered by a physician, an individual with multiple disabilities required wrap around services to maintain him in the community. The Department of Human Services denied his request stating that these services were not medically necessary.
• The Administrative Law Judge used the integration mandate to rule for the individual, finding that these services were necessary for the individual to remain in the community.

• The P&A sued the state hospital because the hospital used a voucher system for prescriptions of certain types of medication, including newer anti-psychotic medications. The P&A argued that the voucher system inhibited the ability of individuals to obtain the treatment they needed to live in the community.

• Suit was dropped after the state provided assurances that a system was in place that provided access to medications regardless of brand or expense.

Ivey v. State Dept. of Health Care Policy and Finance/Mental Health Capitation Program (1998)

• The P & A challenged the state’s implementation of the assessment process that was part of the new Medicaid mental health care program. The new program required that all Medicaid recipients discontinue treatment with their existing providers. An exemption would only be granted if it was proven to be in the "best clinical interests" of the recipient. This determination would made through an assessment. In this case, the court found that the state did not conduct an appropriate assessment.
• The court also noted the "overwhelming evidence" that was presented indicating that the individuals in question would end up in institutions if they were unable to continue with their current providers.

Adam Cale v. Illinois Department of Public Aid (1998)

• The P & A argued that a threatened reduction in home health services for an individual with a disability would violate the title II integration mandate because if the individual is not allotted the necessary hours the individual may have to move into an institution.

But see: Rodriquez v. City of New York, __ F.3d __, 9 A.D. Cases 1469 (2d Cir. 1999)

• ADA requires only that a particular service provided to some not be denied to disabled people; Olmstead does not stand for proposition that states must provide disabled individuals with the opportunity to remain out of institutions, only that states must adhere to nondiscrimination requirements with regard to the services they in fact provide.

Anderson v. Dept. of Public Welfare, 1 F.Supp.2d 456 (E.D. Pa. 1998) (auxiliary aids and services, barrier removal)

• Background: Class action lawsuit on behalf of Medicaid recipients with impaired mobility or vision participating in mandatory managed care program under Title II.
• ADA does not require that each facility in program be accessible, but does require that each provider comply with certain minimum requirements (varying according to facility status as new construction or existing facility).
• It is for the finder of fact to determine whether (a) verbal assistance is a sufficiently effective means of communicating information in provider directories and (b) audiotape is a sufficiently effective means of communicating information in member handbooks.

Burns-Vidlak by Burns v. Chandler, 939 F. Supp. 765 (D. Haw. 1996) (also 980 F.Supp. 1144 re availability of punitive damages)

• Background: Blind and disabled persons challenged policy excluding them from Medicaid managed care pilot under Title II.
• ADA can be used to attack managed care plans that preclude or discourage participation by individuals with disabilities; here, categorical exclusion was clear instance of discrimination.

Olmstead v. L.C., 119 S.Ct. 2176 (1999)

• In its decision the Court laid out the "roadmap" that states must use to develop their integration plans.
• States may demonstrate compliance by showing that they have comprehensive and effective plans for placing qualified individuals with disabilities in less restrictive settings and waiting lists that move at a reasonable pace not influenced by a state’s attempts to keep its institutions fully populated.

• Review all elements of a state’s Medicaid Managed Care plan to assess viability of grievance process and use Olmstead to assess the procedures being developed to move people with disabilities into community settings. Carefully scrutinize financing schemes with incentives for unnecessary institutionalization.

Henrietta D. v. Giuliani, 21 A.D.D. 329, 1996 WL 633382 (E.D.N.Y. 1996)

• Summary: Residents of New York City with AIDS or HIV claimed that the system for distributing benefits through Division of AIDS Services (DAS) was ineffectual and proposed restructuring would exacerbate its inadequacies. City and state moved to dismiss. The court held that: (1) residents failed to demonstrate likelihood of success and thus were not entitled to preliminary injunction; but (2) residents stated causes of action for violations of ADA and Rehabilitation Act.

• The court recognized the difficulty experienced by the persons with disabilities in negotiating the complicated city social service system on their own. The DAS provides assistance to clients in navigating the system, primarily through a case management program. The city and state took the position that DAS is a "special service," a matter of discretion. The plaintiffs argued that DAS was necessary to fulfill requirements of the anti-discrimination laws. They likened DAS to the ramp required for persons in wheelchairs to access public buildings. The court sided with the plaintiffs on this issue: "Defendants are incorrect to the extent that their argument is based on the presumption that they need not make any affirmative efforts to assist plaintiffs in getting their benefits and that DAS is therefore entirely legally gratuitous....The goal of DAS, at least in part, is to facilitate HIV-positive clients who are ill through the complex maze of social services that provide the variety of public assistance benefits to which plaintiffs are entitled. At a minimum, in its most basic, facilitory efforts, DAS is a necessary modification to, and not a fundamental alteration of, the public assistance services that the City provides to all eligible New Yorkers."

• The court noted the limitation on this obligation and most courts that have addressed this issue have been careful to note that a reasonable modification is both moderate and not unduly burdensome.

Marisol A. v. Giuliani, 929 F.Supp. 662 (S.D.N.Y. 1996)

• Summary: Children who had suffered severe abuse and neglect sued state and city child welfare officials, alleging that defendants mishandled plaintiffs' cases and, through defendants' actions or inactions, deprived plaintiffs of their rights under federal and state statutes and constitutions. The plaintiffs survived a motion to dismiss holding that plaintiffs stated claims under the ADA and Rehabilitation Act arising from defendants' alleged failure to take "modest affirmative steps" to permit plaintiffs meaningful access to the child welfare system.

• After reviewing cases interpreting the reasonable accommodation provisions of the anti-discrimination laws, the court concludes: "[T]hese cases stand for the proposition that a disabled individual is entitled to meaningful access to the benefits and services provided by a public agency or an agency receiving federal funds. Access alone, despite defendants' arguments to the contrary, is insufficient. [citation omitted] Rather, a court may require an agency, under certain circumstances, to take affirmative steps to ensure that the access is meaningful."

Wolford v. Lewis, 860 F.Supp. 1123 (S.D.W.Va. 1994)

• Failure to provide transportation to ensure "meaningful access" to services under the Medicaid program is actionable under § 504 of the Rehabilitation Act.

• Additional support for this "affirmative" provision of information may be found in Section 1932(a)(5) of the Balanced Budget Act of 1997 and in the preamble to the proposed Medicaid managed care rule.

Zamora-Quezada v. HealthTexas Medical Group of San Antonio, 34 F.Supp.2d 433 (W.D. Tex. 1998)

• Plaintiffs are two physicians and 13 patients who are alleging that their HMO delayed or denied them full and equal enjoyment of medical treatment and services in violation of Title III of the ADA and the Rehabilitation Act.
• Patient-plaintiffs claim they were forced to endure long waits or medical care was delayed or denied them, while nondisabled patients received better treatment, and that the HMO’s financial arrangements make treating people with disabilities more costly to providers.
• Affidavit from former employee of medical group supported claims that patients with chronic illnesses and disabilities had longer wait times than nondisabled patients.
• Under the contract between the HMO and the medical group, the bigger the loss per patient, the greater the medical group’s share of the losses, and the bigger the surplus per patient, the greater the medical group’s share of the surplus.
• Physician-plaintiffs claim they were terminated by the HMO because they advocated for their disabled patients (i.e., that they suffered discrimination due to their association with the disabled).
• HMO moved to dismiss the case, and court denied the motion to dismiss.

• HMO maintained that all of its decisions were based on actuarial, statistical and empirical data, and so were protected from scrutiny under the ADA’s insurance "safe harbor" (§ 501(c)); court noted that Medicare HMOs are prohibited from discriminating in coverage on the basis of health history or current health status, meaning they cannot engage in traditional insurance functions, e.g., risk rating, and in any event claims concerned clinical treatment.

• HMO maintained that it was not covered by Title III. Title III of the ADA applies to entities that have a right to control a public accommodation; if HMO regulated healthcare decisions made by the medical group, including referrals and admissions, and attempted to monitor and influence physicians’ utilization patterns, it would be subject to Title III.

• HMO also argued that the case was one of disparate impact rather than intentional discrimination, i.e., utilizing cost-control measures will result in some denials of requests for care, and if people with disabilities have more requests, they will have more requests denied; court found the plaintiffs’ specific allegations that delays and denials were disability-based were sufficient to raise genuine issues of fact for trial.

Discrimination-Based-on-Disability Count from Petition:

• "When petitioners...contacted CALOPTIMA primary care providers, they were denied care because of the severity of their disabilities by physicians who stated that they were too much trouble and had too many problems."
• "On information and belief, respondents have implemented a reimbursement scheme which creates a strong financial incentive for participating providers to discriminate against enrollees with severe disabilities. Because providers receive the same capitated fee for every SSI or disability-linked enrollee, it is in their financial interest to accept only those patients whose disabilities are not severe and who will not be expected to require much care in the future."
• "When petitioners have informed CalOPTIMA of discrimination by providers in a particular plan, CalOPTIMA has simply switched the enrollee to another plan."
• "Respondents’ administration of the Medicaid program...subjects recipients with disabilities to discrimination, denies the opportunity to participate in the program and provides them with benefits which are less effective than those provided to others, in violation of 42 U.S.C. § 12132 and 28 C.F.R. § 35.130(b)(i, iii)."

HIPAA: Health Insurance Portability and Accountability Act of 1996 (group insurance) – nondiscrimination mandate, limits on preexisting condition exclusions.

ERISA: Employee Retirement Income Security Act of 1974 (insurance provided by employers) – states that plan administrators have fiduciary duties to beneficiaries.

• Managed care laws

• Civil rights laws
• Laws relating to public assistance programs (e.g., Medicaid, CHIP)
• Insurance reform laws
• Deceptive Trade Practices Acts and other consumer protection laws

Legal Roadblock: ERISA Preemption

Section 501(c) of the ADA states that Titles I through IV should not be construed to prohibit or restrict (1) an insurer or other entity that administers benefit plans from underwriting risks, classifying risks, or administering such risks in a manner based on or not inconsistent with State law; (2) a person or organization from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan based on underwriting risks, classifying risks, or administering such risks in a manner based on or not inconsistent with State law; or (3) a person or organization from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that is not subject to State laws that regulate insurance (ERISA prevents the application of state insurance regulations to employer-sponsored self-funded health plans). However, the safe harbor may not be used as a "subterfuge to evade the purposes of title I and III."

• Possible limitation to legitimate actuarial justification defense?
• Section 501(c) does permit insurers to defend their practices by citing legitimate actuarial data. Actuarial data can be challenged for its legitimacy.
• As those things that an MCO may do as a provider of care under the guise of cost containment, such as physician deselection and utilization review, do not appear to be linked to actuarial data, nor to traditional insurance practices such as underwriting risks, they should not be entitled to a Section 501(c) defense.

Courts are divided over whether Title III protections extend beyond access to physical structures to encompass (a) transactions with insurers/health plans however mediated, and/or (b) the contents (terms and conditions) of an insurance policy or health plan contract. Carparts Distribution Center v. Automotive Wholesaler’s Assn, 37 F.3d 12 (1st Cir. 1994), Pallozzi v. Allstate Life Ins. Co., 1999 WL 1079973 (2nd Cir. 1999), and Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557 (7th Cir. 1999) (broad interpretation) versus Ford v. Schering-Plough Corporation, 145 F.3d 601 (3d Cir. 1998), cert. denied, 119 S.Ct. 850 (1999) and Parker v. Metropolitan Life Ins. Co., 121 F.3d 1006 (6th Cir. 1997), cert. denied, 118 S.Ct. 871 (1998) (narrow interpretation).

Courts are also divided over the application of the ADA to discrimination among health conditions, e.g., special caps for certain kinds of illness, denials of coverage for particular treatments for particular illnesses.

Henderson v. Bodine Aluminum, Inc., 70 F.3d 958 (8th Cir. 1995)

• Background: Title I case; plaintiff with advanced breast cancer requested preliminary injunction compelling plan to cover HDCT-ABMT.

• Court described basis for claim in following manner: "if the evidence shows that a given treatment is non-experimental—that is, if it is widespread, safe, and a significant improvement on traditional therapies—and the plan provides the treatment for other conditions directly comparable to the one at issue, the denial of that treatment arguably violates the ADA"; court found that plaintiff had a sufficient likelihood of success on the merits to warrant an injunction.

Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557 (7th Cir. 1999)

• Background: Title III case involving health insurance policies with special, much lower lifetime caps for treatment of AIDS or ARC.
• Core meaning of anti-discrimination provision of Title III is that owner or operator of facility (whether in physical or electronic space) cannot exclude disabled persons from entering or using facility in the same way as nondisabled, and this means insurance company cannot (without pleading special defense) refuse to sell an insurance policy to a person with AIDS.

• There is, however, no requirement that policy have the same value to persons with AIDS as they would to persons with other diseases or disabilities.

There are a number of other cases unsuccessfully challenging lesser coverage for "mental" versus "physical" illness, e.g., Ford v. Schering-Plough Corporation, Lewis v. Kmart Corp., 180 F.3d 166 (4th Cir. 1999), Lenox v. Healthwise of Kentucky, Ltd., 149 F.3d 453 (6th Cir. 1998).

In its Interim Enforcement Guidance on Application of ADA to Disability Based Distinctions in Employer Provided Health Insurance issued June 8, 1993, the EEOC takes the position that distinctions in health insurance are only subject to scrutiny under the ADA if they are "disability-based." In giving meaning to the concept "disability-based," the EEOC in effect defines two points on a continuum from non-disability-based to disability-based. At the non-disability-based end of the continuum are broad distinctions that (a) apply to the treatment of a multitude of dissimilar conditions and (b) constrain individuals both with and without disabilities (although they may have a greater impact on individuals with disabilities). At the disability-based end of the continuum are distinctions that single out a particular disability, discrete group of disabilities, or disability in general.

In Olmstead v. L.C., 119 S.Ct. 2176 (1999), the Court in a footnote, stated that U.S. nondiscrimination laws encompass disparate treatment among members of the same protected class (citing O’Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996)).

• Title I defines an employer as a "person engaged in an industry affecting commerce… and any agent of such person …" "Employer" may be broadly construed to include any entity that exercises a significant degree of control over any term or condition of employment. The provider of health care benefits exercises a significant degree of control over benefits extending from employment which are critical components of the "employment package".

Carparts Distribution Center Inc. v. Automotive Wholesalers Ass’n of New England Inc., 37 F.3d 12 (1st Cir. 1994)

• An argument can be made that the HMO is acting as an employer or an agent of the employer for the purpose of providing benefits. Employees who will most often be denied treatment, referrals to specialists, and rehabilitative treatment will be those individuals that fall more often under the definition of disability.

Woolfolk v. Duncan, 872 F.Supp. 1381 (E.D. Pa. 1995)

• Background: Allegation that physician, among others, refused to treat enrollee with HIV.

• Where MCO has right and authority to interfere with and control a provider’s treatment of enrollees, there is a genuine issue of material fact as to whether MCO is vicariously liable for provider’s conduct under Title III of the ADA (and the Rehabilitation Act).

Informal Procedures

Department of Health and Human Services Office for Civil Rights

Families USA Foundation has a number of guides that provide a basic overview of a topic, and then offer extensive information, case studies, and best practices for advocates. Two may be of particular interest to people with disabilities and disability advocates:

A Guide to Meeting the Needs of People with Chronic and Disabling Conditions in Medicaid Managed Care (January 1998).

A Guide to Access to Providers in Medicaid Managed Care (April 1998).

These guides are free. For more information, you can contact FamiliesUSA by email at info@familiesusa.org, by telephone at (202) 628-3030, or visit their website, www.familiesusa.org.

The National Health Law Program has created "An Advocacy Checklist for People with Disabilities" to assist in review of state Medicaid managed care contracts. This document, and other valuable tools, are available on the NHeLP website at www.nhelp.org.

In October 1998, the Health Care Financing Administration published a document entitled "Key Approaches to the Use of Managed Care Systems for Persons with Special Health Care Needs." This guidance document is intended to aid states in planning, but it can also be used to hold states, and health plans, accountable. (After all, if something is "key," it should be addressed at the state and plan levels.) This document is available at www.hcfa.gov/medicaid/smd-snpf.htm. The revised 1915(b) waiver renewal application form requires states to report on their efforts to comply with ADA requirements, among other things. See "Section F: Special Populations" and "Addendum to Section F: Draft Interim Review Criteria for Children with Special Needs." In states that are implementing mandatory managed care for Medicaid beneficiaries with special needs, advocates should review this information and monitor program and plan performance. (Note: HCFA has yet to issue a much-anticipated report to Congress on safeguards for special needs populations.)

The National Alliance for the Mentally Ill has created a report card that can be used to evaluate mental health services. To see how it works, request a copy of Stand and Deliver: Action Call to a Failing Industry by calling 1-800-950-NAMI, or read a summary at www.nami.org/update/reportcard.htm. The Substance Abuse and Mental Health Services Administration has a Managed Care Technical Assistance Series that includes titles such as Partners in Planning: Consumers’ Role in Contracting for Public-Sector Managed Mental Health and Addiction Services. Like the other materials referenced in this resource list, this helpful guidebook should be available free-of-charge. You can get more information from the SAMHSA managed care initiative website, www.samhsa.gov/mc.

Mary E. Stuart and Michael Weinrich, "Beyond Managing Medicaid Costs: Restructuring Care," Milbank Quarterly 76, no. 2 (1998): 251.