The problems you are describing are entirely related to the types of tickets you purchased and medical conditions. You would have the exact same problem with other airlines.
Have you looked at travel insurance which covers medical conditions and cancellation of tickets? Were all pax on the same PNR or separate tickets? Have you considered that you may have misinterpreted what the phone agent said?

Sounds to me like you have two options if you don't have appropriate travel insurance:

1) Fight for a full refund, but the burden of proof may be on you to show you were offered a full refund.
2) Rebook a new flight ASAP using the credit.