292 F. Supp. 3d 1222
D.N.M.2018Background
- Decedent Billie Joe Hall was enrolled in a Medicare Advantage (Part C) plan through Presbyterian Health Plan, Inc. (PHP); PHP was required to follow Medicare coverage rules and make individual "medical necessity" determinations.
- In August 2014 Dr. Gregg Valenzuela requested authorization for a liver-transplant evaluation; PHP reviewed the records and denied the evaluation under its MPM 20.6 policy, stating Ms. Hall's liver disease was not severe enough.
- PHP sent a written Notice of Denial that explained the appeal process (standard or expedited) and that an independent reviewer would be involved after internal denial; Ms. Hall did not pursue an appeal.
- Ms. Hall died of end-stage liver disease in December 2014; her heirs sued in state court asserting wrongful-death/negligence and age-discrimination claims against PHP for denying the transplant evaluation.
- PHP removed the case to federal court; after Plaintiffs narrowed claims and the court considered federal defenses, PHP moved for summary judgment arguing preemption by the Medicare Act, failure to exhaust administrative remedies, and immunity.
- The court concluded Plaintiffs’ claims were preempted by the Medicare Advantage preemption clause and, because Plaintiffs failed to exhaust the Medicare administrative appeal process, dismissed the claims against PHP with prejudice and remanded remaining state-law claims against other defendants to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plaintiffs' state-law wrongful-death/negligence and discrimination claims are preempted by 42 U.S.C. § 1395w-26(b)(3) | Plaintiffs contend claims are traditional state-law torts (medical negligence/age discrimination) independent of Medicare and thus not preempted | PHP contends Medicare Advantage regulations and required medical-necessity determinations govern the conduct at issue, so federal standards supersede state law | Court: Claims are preempted because they depend on medical-necessity determinations and federal MA rules that require plans to promulgate/apply coverage policies |
| Whether Plaintiffs' claims "arise under" the Medicare Act such that exhaustion of administrative remedies is required | Plaintiffs argue they seek tort damages, not Medicare benefits, so claims do not "arise under" Medicare and are not subject to the administrative channeling requirement | PHP argues claims are "inextricably intertwined" with denial of Medicare benefits and thus fall within Medicare's exhaustion regime | Court: Claims "arise under" Medicare (inextricably intertwined) and must be channeled through administrative appeals; Plaintiffs failed to exhaust, so court lacks jurisdiction and dismisses claims |
| Whether a factual dispute over whether age (rather than medical-necessity criteria) motivated denial defeats preemption/exhaustion | Plaintiffs assert denial was pretextual and age-based; this would transform claim into traditional tort | PHP asserts regardless of motive, the claim challenges an MA coverage determination governed by federal standards | Court: Motive dispute is immaterial for preemption/exhaustion; even alleged wrongful application or disregard of medical-necessity standard is governed by Medicare law |
| Remedy/breach focus: Whether seeking wrongful-death damages (not retroactive benefits) avoids preemption/exhaustion | Plaintiffs rely on authority holding remedy-focused analysis excludes Medicare "arising under" character | PHP warns that remedy focus would allow plaintiffs to evade administrative process by recasting coverage disputes as tort claims | Court: Remedy alone is not dispositive; allowing such a tactic would eviscerate administrative scheme—claims dismissed for lack of jurisdiction due to non-exhaustion |
Key Cases Cited
- Via Christi Reg'l Med. Ctr., Inc. v. Leavitt, 509 F.3d 1259 (10th Cir.) (describes Medicare administration and CMS role)
- Sunshine Haven Nursing Operations, LLC v. U.S. Dep't of Health & Human Servs., Ctrs. for Medicare & Medicaid Servs., 742 F.3d 1239 (10th Cir.) (explains Medicare Parts and Medicare Advantage structure)
- Uhm v. Humana, Inc., 620 F.3d 1134 (9th Cir.) (claims governed by federal standards and exhaustion required where underlying conduct is covered by Medicare rules)
- Ardary v. Aetna Health Plans, 98 F.3d 496 (9th Cir.) (discusses when wrongful-death/tort claims do not "arise under" Medicare)
- Heckler v. Ringer, 466 U.S. 602 (Sup. Ct.) (tests for when state-law claims are "inextricably intertwined" with federal benefit claims)
- Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (Sup. Ct.) (remedy-focused analysis not dispositive for "arising under" question)
- Morrison v. Health Plan of Nevada, 328 P.3d 1165 (Nev. 2014) (state negligence claim preempted where federal standards govern plan conduct)
- Associates Rehabilitation Recovery, Inc. v. Humana Med. Plan, Inc., 76 F. Supp. 3d 1388 (S.D. Fla.) (provider's challenge to medical necessity decisions must proceed through Medicare administrative appeals)