First Medical Health Plan, Inc. v. Vega-Ramos

• Citation: 479 F.3d 46
• Decision Date: 22 February 2007
• Docket Number: No. 06-1514.,06-1514.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Parties: FIRST MEDICAL HEALTH PLAN, INC., Plaintiff, Appellee, v. Nancy VEGA-RAMOS, as Executive Director of the "Administración de Servicios de Salud de Puerto Rico", Defendant, Appellant.

479 F.3d 46

FIRST MEDICAL HEALTH PLAN, INC., Plaintiff, Appellee, v. Nancy VEGA-RAMOS, as Executive Director of the "Administración de Servicios de Salud de Puerto Rico", Defendant, Appellant.

No. 06-1514.

United States Court of Appeals, First Circuit.

Heard October 31, 2006.

Decided February 22, 2007.

Lizzie M. Portela, for appellant.

Richard W. Siehl with whom Baker & Hostetler LLP, Alberto G. Estrella, Kenneth C. Suria and William Estrella Law Offices, PSC, were on brief, for appellee.

Before TORRUELLA, Circuit Judge, STAHL, Senior Circuit Judge, and HOWARD Circuit Judge.

HOWARD, Circuit Judge.

This is an appeal from the entry of a preliminary injunction against Nancy Vega-Ramos, the executive director of the Administración de Servicios de Salud de Puerto Rico (ASES), the entity responsible for administering the Commonwealth of Puerto Rico's Medicaid program. The injunction requires ASES to permit health insurance provider First Medical Health Plan, Inc. (First Medical) to participate in Medicare Platino, an ASES-run program designed to extend full prescription drug coverage to Puerto Rico residents eligible for Medicare and Medicaid. Vega also appeals the denial of her motion to dismiss First Medical's complaint for failure to state a claim under Fed.R.Civ.P. 12(b)(6). We vacate the injunction and remand for dismissal of the complaint.

I.

Enacted in 1965, Medicare is a federally run health insurance program benefitting primarily those who are 65 years of age and older. Before the recent extension of Medicare to cover a portion of prescription drug costs, Medicare covered only inpatient care through Part A and outpatient care through Part B. Parts A and B are fee-for-service insurance programs operated by the federal government. 42 U.S.C. § 1395c et seq. (Part A); 42 U.S.C. § 1395j et seq. (Part B). In 1997, Congress enacted Medicare Part C to allow Medicare beneficiaries to opt out of traditional fee-for-service coverage under Parts A and B. 42 U.S.C. § 1395w-21 et seq. (Part C). Under Part C, beneficiaries can, inter alia, enroll in "Medicare Advantage" plans, privately-run managed care plans that provide coverage for both inpatient and outpatient services.¹ Id. § 1395w-22(a)(1).

Medicare beneficiaries who are indigent are referred to as "dual eligible" beneficiaries, meaning that they also qualify for Medicaid assistance. Id. § 1396u-5(c)(6)(A). Each state administers a Medicaid program (with substantial federal funding) to provide medical coverage to its economically disadvantaged population. See id. § 1396a et seq. Dual eligible beneficiaries receive Medicaid coverage for health services not covered by Medicare and receive Medicaid funds to pay premiums and copayments that they incur for Medicare-covered services. See Omnibus Budget Reconciliation Act of 1986, Pub L. No. 99-509, § 9403 (1986) (codified in scattered sections of 42 U.S.C.).

In 2003, Congress enacted the Medicare Modernization Act (MMA) to extend partial coverage for prescription drugs to Medicare beneficiaries under Medicare Part D. See Pub.L. No. 173, Tit. I (2003) (Part D); see also 42 U.S.C. § 1395u-102(b) (establishing beneficiary responsibility for a portion of prescription drug costs under Part D). Under the MMA, participation in Medicare Part D is voluntary for non-dual-eligible beneficiaries. 42 U.S.C. § 1395-101(a). Medicare Advantage plans may offer Part D coverage to their enrollees. Id. § 1395-101(a)(1)(b)(i). Thus, Medicare Advantage plan enrollees may receive all of their Medicare coverage through a single managed care plan. If, however, a Medicare beneficiary is enrolled in a Medicare Advantage plan that does not offer Part D coverage, id. § 1395-101(a)(B)(iii), or the beneficiary is not enrolled in Part C at all, id. § 1395w-101(A), the beneficiary may join a "Prescription Drug Plan" to obtain Part D benefits.²

Unlike other Medicare beneficiaries, a dual eligible beneficiary must join a Part D plan (either a Medicare Advantage plan that offers Part D coverage or a Prescription Drug Plan). 42 U.S.C. § 1395w-101(b)(1)(C). If a dual eligible beneficiary fails to do so, the Secretary of Health and Human Services (Secretary) automatically enrolls the beneficiary in such a plan. Id. But, as mentioned above, because Part D provides only partial prescription drug coverage, dual eligible beneficiaries typically need additional assistance to pay their portion of prescription drug costs. The MMA addresses this problem differently depending on whether the dual eligible beneficiary lives in one of the fifty states or in one of the United States' territories.³

Prior to the MMA, Medicaid typically paid prescription drug coverage for dual eligible beneficiaries. The MMA ended this practice for dual eligible beneficiaries living in the states. Id. § 1396u-5(d)(1). The MMA prohibits state Medicaid programs—but not territory Medicaid programs—from paying for any portion of prescription drug costs normally shouldered by the beneficiary under Part D. Id.; 42 U.S.C. § 1396u-5(e) (excluding territories from the prohibition on Medicaid providing prescription drug assistance). Rather than allowing Medicaid to pay these costs, the MMA creates a subsidy program through which Medicare provides funds directly to indigent Part D beneficiaries to help them pay their share of drug costs. Id. § 1395w-114.

The MMA excludes the dual eligible population residing in the territories from receiving these Medicare subsidies. 42 U.S.C. § 1395w-114(a)(3)(F). Instead, the MMA authorizes each territory to seek approval from the Secretary to implement a plan to provide full prescription drug coverage for its dual eligible population. Id. § 1396u-5(e). If the Secretary approves the territory's plan, the federal government increases the territory's Medicaid allotment to help pay for this assistance. Id. § 1396u-5(e)(3).

In accord with this provision, ASES submitted to the Secretary a plan entitled "Medicare Platino" to provide assistance for Puerto Rico's dual eligible population to pay its share of Part D covered drug costs. As part of the plan, ASES stated that it would extend coverage to the dual eligible population by, inter alia, contracting with various Medicare Advantage plans that offered Part D coverage.

After receiving approval from the Secretary for Medicare Platino, ASES sought applications from qualified Medicare Advantage plans to participate. In its request for applications, ASES stated that under Puerto Rico Law 72, it could not allow any Medicare Advantage plan to join Medicare Platino if the plan owned or operated health facilities that could provide covered services to a Medicare Platino covered beneficiary. See 24 P.R. Laws Ann. § 7033(c). That is, under Puerto Rico law, ASES could not permit a Medicare Advantage plan to join Medicare Platino if the plan could engage in self-dealing.

First Medical, a federally qualified Medicare Advantage plan operating in Puerto Rico, applied to participate in Medicare Platino. ASES rejected First Medical's application under Law 72 because First Medical owned health care facilities that could provide covered services to Medicare Platino beneficiaries. First Medical responded by filing suit in federal district court, arguing that Law 72 was preempted by federal law. First Medical relied on an MMA provision providing that "standards established by [Medicare] supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to [Medicare Advantage] plans which are offered by a Medicare Advantage Organization under . . . Part" C of Medicare. 42 U.S.C. § 1395w-26(b)(3). The complaint alleged that Law 72 was preempted in these circumstances because it constitutes an impermissible standard governing First Medical's operation as a Medicare Advantage plan under Medicare Part C.

Vega moved to dismiss the complaint for failure to state a claim, and First Medical moved for a preliminary injunction to permit it to join Medicare Platino. The district court denied the motion to dismiss and entered the preliminary injunction. The court ruled that First Medical is a Medicare Advantage plan, and that the preemption provision contained in 42 U.S.C. § 1395w-26(b)(3) prevents ASES from enforcing Law 72 to bar First Medical from joining Medicare Platino. Vega appealed the entry of the preliminary injunction and the denial of the motion to dismiss.

II.

A. Appellate Jurisdiction

Before addressing the merits of the district court's rulings, we confront First Medical's challenge to our jurisdiction to consider the denial of Vega's motion to dismiss. First Medical argues that the denial of a motion to dismiss is an interlocutory ruling over which we have no jurisdiction unless the district court has certified the order for appeal under 28 U.S.C. § 1292(b), which it did not do.

First Medical is correct that, under the final judgment rule, we typically may not review the denial of a motion to dismiss under Fed.R.Civ.P. 12(b)(6). See, e.g., Marie v. Allied Home Mort. Corp., 402 F.3d 1, 6 n. 1 (1st Cir.2005). But where, as here, we have before us an interlocutory appeal from the entry of a preliminary injunction, see 28 U.S.C. § 1292(a)(1), there is an exception to this general principle.

In Deckert v. Indep. Shares Corp., 311 U.S. 282, 287, 61 S.Ct. 229, 85 L.Ed. 189 (1940), the Supreme Court ruled that a court of appeals correctly considered the denial of a motion to dismiss for failure to state a claim in conjunction with an interlocutory appeal from an order granting a preliminary injunction. The Court explained that the "power [to hear interlocutory appeals from the entry of a preliminary injunction] is not limited to mere consideration of, and action upon, the order appealed from. If insuperable objection to maintaining the bill clearly appears, it may be dismissed and the litigation terminated." Id. This rule serves the salutary purpose of saving "both ...