Healthcare and the Uninsured: Judicial Response to Challenges by Patients
Healthcare Law Newsletter
In this election year with a troubled economy, the rising costs of healthcare will continue to be the subject of much debate. Recently, a segment of the population – the uninsured – however, is challenging in court the escalating healthcare costs, alleging various theories. The uninsured plaintiffs contend they are charged even higher costs than insured patients because the uninsured do not have the benefit of discounted rates negotiated by commercial payors. Two recent decisions are illustrative: Galvan v Northwestern Memorial Hospital, ___ Ill.App.3d ___, 888 N.E.2d 529 (2008), and DiCarlo v St. Mary's, et. al, No. 06-3579, 2008 WL 2498106 (3rd Cir. 2008).
In Galvan, the plaintiff brought a class action lawsuit against not-for-profit hospitals in Illinois challenging the practice of charging more to uninsured patients. Plaintiffs contend the hospital charges were an unfair and deceptive practice under the Illinois Consumer Fraud Act. The trial court granted the hospital’s motion to dismiss. On appeal, Galvan maintained that he had stated a cause of action under the Consumer Fraud Act, among other theories. Galvan pointed out that the hospital’s practice of billing uninsured patients “gross” or “list hospital charges” amounted to charges that were more than 50 percent of the bills sent to insured patients. Galvan contended that practice was an “unfair and deceptive” practice.
In rejecting Galvan's contention, the appellate court concluded that he had not met the necessary elements of the statute. The appellate court found the practice of charging uninsured patients higher prices, by itself, was not “unfair.” The court noted that insured patients pay health insurance premiums. In exchange, their insurers negotiate lower rates with hospitals, but also guarantee early payment. Uninsured patients pay no premiums and the hospital has no guarantee of payment. A differential price structure under this circumstance does not amount to an “unfair” practice. The court also found Galvan had not pleaded that he sustained any damages caused by concealment or a “deceptive” act. Nor was there any allegation the hospital profited from the rates charged to uninsureds. Accordingly, the state appeals court affirmed dismissal of the case.
In Galvan, the federal appeals court in DiCarlo concluded that the New Jersey Consumer Fraud Act did not apply to a hospital’s billing practices. In so finding, the trial court granted the defense motion for judgment on the pleadings. On appeal, DiCarlo argued that the hospital's practice of “price gouging” uninsured patients and charging “unfair and unreasonable prices” constituted “unconscionable commercial conduct” under the act. The court was sympathetic to the “burdens on uninsured patients who need medical care and recognize the severe economic hardships that the lack of insurance imposes on them.” However, it was not convinced that the courts were the proper venue to decide this issue. The court affirmed the district court’s decision in its entirety.
The decisions in Galvan and DiCarlo highlight the arguments the uninsured have made in challenging the disparity in costs that result from a hospital's billing practices. Implicit in both decisions is a call for action by the Legislature.