58 F.4th 5
1st Cir.2023Background
- Puerto Rico enacted Act 90 (2019) to address an exodus of medical professionals by requiring Medicare Advantage Organizations (MAOs) to pay in-network providers in Puerto Rico at least the Medicare fee‑for‑service rates (the "Mandated Price Provision").
- Medicare Advantage (Part C) uses private MAOs that contract with providers and compete via bids and plan design rather than fixed fee‑for‑service reimbursement; Congress and CMS emphasized competitive bidding and forbade administered pricing.
- The Medicare Advantage Act contains an express preemption clause preempting "any State law or regulation" with respect to Medicare Advantage plans (except licensing and solvency laws), and a "noninterference" provision restricting the Secretary from requiring particular price structures.
- A trade association and several MAOs sued in federal district court seeking a declaration and injunction that Act 90 is preempted; hospitals and provider groups intervened to defend Act 90.
- The district court granted judgment for the MAOs, holding the Mandated Price Provision expressly preempted by the Medicare Advantage Act; Puerto Rico appealed.
- The First Circuit affirmed, concluding Congress intended broad preemption of state laws that regulate Medicare Advantage plans, and that Act 90's mandated pricing conflicts with the federal statutory and regulatory scheme.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Act 90's Mandated Price Provision is preempted by the Medicare Advantage Act | MAOs: the federal preemption clause covers any state law "with respect to" MA plans and thus preempts Act 90 | Puerto Rico: the clause requires a federal "standard" addressing the same subject; no specific federal standard bars state pricing rules | Held: Express preemption applies; Act 90 preempted. |
| Whether the presumption against preemption applies | MAOs: express clause controls; no presumption should apply | Puerto Rico: courts should apply presumption against preemption absent clear intent | Held: No presumption applies where statute contains an express preemption clause (Franklin controlling). |
| Whether a federal "standard" exists governing MAO pricing sufficient to trigger preemption | MAOs: Medicare Advantage's competitive bidding, prohibition on administered pricing, and regulations are federal standards addressing pricing | Puerto Rico: Congress/regulations lack a specific, overlapping standard forbidding state-set price floors | Held: Federal standards (statute, regs, policy favoring competitive bids and noninterference) address pricing; preemption clause does not require greater specificity. |
| Whether Act 90 conflicts with federal scheme even under broader preemption theory | MAOs: mandating fee‑for‑service minimums interferes with MAOs' competitive bidding and plan design | Puerto Rico: state interest in retaining providers and ensuring minimum pay does not "conflict" with federal goals | Held: Act 90 conflicts with the federal regulatory and statutory scheme that envisions market‑based MAO pricing; conflict supports preemption. |
Key Cases Cited
- Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (presumption against preemption principle)
- Puerto Rico v. Franklin Cal. Tax‑Free Tr., 579 U.S. 115 (express preemption clauses obviate presumption)
- Chamber of Commerce v. Whiting, 563 U.S. 582 (focus on plain wording of an express preemption clause)
- Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363 (interpret statute as a whole to determine preemptive scope)
- Medtronic, Inc. v. Lohr, 518 U.S. 470 (congressional intent is the ultimate touchstone in preemption analysis)
- First Med. Health Plan, Inc. v. Vega‑Ramos, 479 F.3d 46 (First Circuit preemption analysis in Medicare context)
- UnitedHealthcare Ins. Co. v. Becerra, 16 F.4th 867 (description of Medicare Advantage structure and bidding system)
- Pharm. Care Mgmt. Ass'n v. Wehbi, 18 F.4th 956 (8th Cir. on broadened preemption after the 2003 amendment)