Lead Opinion
Opinion by Judge HURWITZ; Concurrence by Judge CALLAHAN.
OPINION
This case involves the Medicare Act, one of “the most completely impenetrable texts within human experience.” Cooper Univ. Hosp. v. Sebelius,
I.
Facts and Procedural Background
Manuel Parra was injured when struck by a car as he was walking through a parking lot. Parra was a participant, in a MAO plan offered by PacifiCare of Arizona, Inc., which paid his hospital and medical bills.
After Parra died from injuries suffered in the accident, his wife and children (the “Survivors”) made a demand for wrongful death damages against the driver’s $500,000 GEICO automobile insurance policy. See Ariz.Rev.Stat. § 12-612 (allowing the surviving spouse, child, parent, guardian or personal representative of a deceased person to bring a wrongful death action); id. § 12-613 (allowing damages in a wrongful death action “with reference to the injury resulting from the death to the surviving parties”). PacifiCare also made a claim against the GEICO policy for the $136,630.90 it expended for Parra’s care. The Survivors eventually entered into a settlement with GEICO, under which the insurer issued a $136,630.90 check jointly payable to the Survivors’ attorney and to PacifiCare’s affiliate, to be held in trust pending resolution of the parties’ dispute, and paid the balance of the policy limits to the Survivors.
The Survivors then filed a complaint in the United States District Court for the District of Arizona, seeking declaratory and injunctive relief. The complaint contended that under Arizona law the policy proceeds were not subject to PacifiCare’s anticipated claims. See Ariz.Rev.Stat. § 12-613 (“The amount recovered in such action shall not be subject to debts or liabilities of the deceased, unless the action is brought on behalf of the decedent’s estate.”); Gartin v. St. Joseph’s Hosp. & Med. Ctr.,
PacifiCare counterclaimed, also seeking declaratory relief, arguing it was entitled to reimbursement under both the terms of its contract with Parra (Count I) and directly under the Medicare Act (Count II). The parties each moved for summary judgment. The motions were referred to a magistrate judge, who sua sponte recommended dismissal of the action for lack of subject matter jurisdiction.
The district court accepted and adopted the magistrate judge’s Report and Recommendation as its own findings of fact and conclusions of law. But rather than dismissing Count II for lack of subject matter jurisdiction, the court granted, the Survivors’ motion for summary judgment “to the extent it asks [the court] to find [Pacifi-Care] does not have a private cause of action under the Medicare statute or the Medicare Secondary Payer (MSP) Act.”
PacifiCare appealed the district court’s judgment. We have jurisdiction under 28 U.S.C. § 1291, and review de novo a dismissal for failure to state a claim. Uhm v. Humana, Inc.,
II.
Failure to State a Claim or Lack of Subject Matter Jurisdiction?
The magistrate judge recommended that Count II be dismissed for lack of subject matter jurisdiction; the district court, although adopting the magistrate judge’s recommendation and report, instead concluded that Count II failed to state a claim upon which relief can be granted. This duality is understandable; our decisions have analyzed whether a cause of action exists under federal law both ways. Compare, e.g., Thompson v. Thompson,
The Supreme Court has counseled that “^jurisdiction ... is not defeated ... by the possibility that the aver-ments might fail to state a cause of action on which petitioners could actually recover.” Bell v. Hood,
A.
The Medicare Act
Medicare, enacted in 1965, is a federal health insurance program primarily bene-fitting those 65 years of age and older. See Social Security Amendments of 1965, Pub.L. No. 89-97, 79 Stat. 286 (codified as amended at 42 U.S.C. §§ 1395 to 1395kkk-1). Medicare Part A covers inpatient hospital care, 42 U.S.C. §§ 1395c to 1395i-5, and Part B covers services and equipment, 42 U.S.C. §§ 1395j to 1395w-5.
In 1980, Congress added the Medicare Secondary Payer provisions (“MSP”) to the Medicare Act. Omnibus Reconciliation Act of 1980, Pub.L. No. 96-499, 94 Stat. 2599 (codified as amended at 42 U.S.C. § 1395y(b)). The MSP makes Medicare insurance secondary to any “primary plan” obligated to pay a Medicare recipient’s medical expenses, including a third-party tortfeasor’s automobile insurance. 42 U.S.C. § 1395y(b)(2)(A). When Medicare makes a conditional payment on behalf of a beneficiary, the primary plan must reimburse the Trust Fund. Id. § 1395y(b)(2)(B)(ii). The MSP also subro-gates the United States to a beneficiary’s right to pursue the primary plan, id. § 1395y(b)(2)(B)(iv), and provides the United States with an independent right to recover double damages from a responsible entity which refuses to reimburse the Trust Fund, id. § 1395y(b)(2)(B)(iii).
In 1986, the Medicare Act was further amended to include “a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement).” Omnibus Budget Reconciliation Act of 1986, Pub.L. No. 99-509, 100 Stat. 1874 (codified as amended at 42 U.S.C. § 1395y(b)(3)(A)). The private cause of action allows Medicare beneficiaries and healthcare providers to recover medical expenses from primary plans. See, e.g., Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas Health & Welfare Fund,
In 1997, Congress enacted Medicare Part C, providing for private Medicare Advantage plans. Balanced Budget Act of 1997, Pub.L. No. 105-33, 111 Stat. 251 (codified as amended at 42 U.S.C. §§ 1395w-21 to w-28). Part C allows eligible participants to opt out of traditional Medicare and instead obtain various benefits through MAOs, which receive a fixed payment from the United States for each enrollee. 42 U.S.C. §§ 1395w-21, 1395w-23. Part C is intended to “allow beneficiaries to have access to a wide array of private health plan choices in addition to traditional fee-for-service Medicare.... [and] enable the Medicare program to uti
Part C authorizes, but does not compel, a MAO to charge a primary plan for medical expenses paid on behalf of a participant:
Notwithstanding any other provision of law, a Medicare [Advantage] organization may (in the case of the provision of items and services to an individual under a Medicare [Advantage] plan under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2) of this title) charge or authorize the provider of such services to charge, in accordance with the charges allowed under a law, plan, or policy described in such section—
(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.
42 U.S.C. § 1395w-22(a)(4).
B.
PacifiCare’s Claims
PacifiCare argues that it has a private right of action to pursue reimbursement under two provisions of the Medicare Act: (1) § 1395w-22(a)(4) (the “MAO Statute”) and (2) § 1395y(b)(3)(A) (the “Private Cause of Action”). We address each in turn.
Notwithstanding any other provision of law, the eligible organization may (in the case of the provision of services to a member enrolled under this section for an illness or injury for which the member is entitled to benefits under a workmen’s compensation law or plan of the United States or a State, under an automobile or liability insurance policy or plan, including a self-insured plan, or under no fault insurance) charge or authorize the provider of such services to charge, in accordance with the charges allowed under such law or policy—
(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or
(B) such member to the extent that the member has been paid under such law, plan, or policy for such services.
1. The MAO Statute
PacifiCare contends that because the MAO Statute allows a MAO to charge a primary plan for conditional payments made on behalf of a plan participant, that statute grants it a private right of action to recover those payments as well. We find the argument unavailing.
On its face, the MAO Statute does not purport to create a cause of action. Rather, it simply describes when MAO coverage is secondary to other insurance, and permits (but does not require) a MAO to include in its plan provisions allowing recovery against a primary plan, as PacifiCare did here. In considering 42 U.S.C. § 1395mm(e)(4), a provision virtually identical to the MAO Statute governing privately-run health maintenance organizations (“HMOs”),
We agree. The MAO Statute simply allows PacifiCare to provide via its contracts that its- insurance is secondary to other available plans and allows recovery from a primary plan that refuses to reimburse the MAO for payments made on behalf of a participant. In the end, the MAO’s claim thus arises by virtue of its decision to include provisions allowing such recovery in its contract with plan participants.
PacifiCare also argues that the MAO Statute creates a federal cause of action by cross-referencing § 1395y(b)(2)(B)(iii), which provides, in part, that the “United States may bring an action against any or all entities that are or were required or responsible ... to make payment with, respect to the same item or service ... under a primary plan.” PacifiCare contends that because this provision creates a cause of action in favor of the United States, the reference to it in the MAO Statute means that a federal claim is also created for MAOs.
We are not persuaded. The cross-reference to § 1395y(b)(2)(B)(iii) in the MAO Statute simply explains when MAO coverage is secondary to a primary plan—“under circumstances in which payment under this subchapter is made secondary pursuant to section 1395y(b)(2)”—that is, under the same circumstances when insurance through traditional Medicare would be secondary. The cross-reference defines when MAO coverage is secondary, and does not create a federal cause of action in favor of a MAO.
PacifiCare also cites 42 C.F.R. § 422.108(f), which provides that MAOs exercise “the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations.” The regulation adds nothing to a MAO’s claim to a private right of action. See Alexander v. Sandoval,
2. The Private Cause of Action
PacifiCare next argues that the Private Cause of Action authorizes' its claim against the Survivors. PacifiCare relies heavily on In re Avandia Mktg.,
The Private Cause of Action applies “in the case of a primary plan which fails to provide for primary payment.” 42 U.S.C. § 1395y(b)(3)(A). But here, Pacifi-Care makes-no claim against GEICO, the primary plan, nor has that plan failed to provide for payment. GEICO long ago tendered the sum claimed by PacifiCare, and simply protected itself against a conflicting claim by the Survivors. Pacifi-Care’s claim for relief is not against the insurer, or even against Parra’s estate for sums received from a primary plan for medical expenses, but rather against the Survivors and their claim to this disputed res.
The Private Cause of Action was intended to allow private parties to vindi
C.
Other Bases for Federal Jurisdiction
1. Federal Common Law
Even if PacifiCare lacks a private cause of action directly under the Medicare Act and is thus unable to state a claim under Count II, PacifiCare urges that we find an independent basis of federal jurisdiction over Count I, its plan-based claim, because that contract arises under federal “common law.” PacifiCare argues that in the absence of such common law, state courts may reach conflicting decisions with respect to claims by MAOs against primary plans or settlement proceeds. But, of course, the same danger exists when different federal courts address an issue, and a generalized desire for uniformity does not suffice to warrant the creation of federal common law. O’Melveny & Myers v. F.D.I. C.,
2. Complete Preemption
PacifiCare next argues that the doctrine of complete preemption confers federal subject matter jurisdiction over Count I. This doctrine “confers exclusive federal jurisdiction in certain instances where Congress intended the scope of a federal law to be so broad as to entirely replace any state-law claim.” Marin Gen. Hosp. v. Modesto & Empire Traction Co.,
Finally, PacifiCare contends that even if Count I presents only questions of state law, the district court should have nonetheless exercised supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a). However, once the district court, at an early stage of the litigation, dismissed the only claim over which it had original jurisdiction, it did not abuse its discretion in also dismissing the remaining state claims. 28 U.S.C. § 1367(c)(3).
III.
Conclusion
We affirm the district court’s dismissal of Count II for failure to state a claim as well as its decision to decline to exercise supplemental jurisdiction over Count I.
AFFIRMED.
Notes
. Compare also W. Radio Servs. Co. v. Qwest Corp.,
. Section 1395mm(e)(4) provides:
. PacifiCare also argues that even in the absence of complete preemption, the MAO Statute preempts any Arizona law preventing re-
Concurrence Opinion
concurring:
I concur in the panel’s decision, but write separately to make explicit an important jurisdictional point implicitly addressed by the majority.
As the majority acknowledges, our opinions are less than consistent on whether district courts have jurisdiction to determine if a federal law affords a litigant a private right of action. See Maj. Op. at 1151 & n. 1 (comparing Western Radio Services Co. v. Qwest Corp.,
Our opinion in North County Communications accepted without analysis the district court’s conclusion that the lack of a private right of action deprived that court of jurisdiction.
In contrast, our remaining decisions have more extensively addressed the issue of subject matter jurisdiction and are in accord with our opinion today. For example, Thompson v. Thompson,
The district court erred in dismissing [the] complaint for lack of subject matter jurisdiction. [The] complaint alleges a violation of a federal statute, 28 U.S.C. § 1738A. Federal question jurisdiction exists unless the cause of action alleged is patently without merit, see Duke Power Co. v. Carolina Environmental Study Group, Inc.,438 U.S. 59 , 70-71,98 S.Ct. 2620 , 2628-29,57 L.Ed.2d 595 (1978), or the allégation is clearly immaterial and made solely for the purpose of obtaining jurisdiction. See Mt. Healthy City School District Board of Education v. Doyle,429 U.S. 274 , 279,97 S.Ct. 568 , 572,50 L.Ed.2d 471 (1977). The court must assume jurisdiction to decide*1157 whether the complaint states a cause of action on which relief can be granted. Bell v. Hood,327 U.S. 678 , 682,66 S.Ct. 773 , 776,90 L.Ed. 939 (1946). Because jurisdiction is not defeated by the possibility that the complaint might fail to state a claim upon which recovery can be had, the failure to state a valid claim is not the equivalent of a lack of subject matter jurisdiction, and calls for a judgment on the merits rather than for a dismissal for lack of jurisdiction. Rodriguez v. Flota Mercante Grancolombiana, S.A.,703 F.2d 1069 , 1072 (9th Cir.), cert. denied,464 U.S. 820 ,104 S.Ct. 84 ,78 L.Ed.2d 94 (1983).
Our opinion should dispel some of the confusion concerning a district court’s subject matter jurisdiction to determine whether a litigant asserts a federal cause of action by reaffirming our reading of Supreme Court precedent articulated in Thompson and Western Radio Services. In sum, a district court has subject matter jurisdiction to determine whether a private right of action exists under federal law.
. See also Lapidus v. Hecht,