Caremark, Inc. v. Goetz

• Decision Date: 13 March 2007
• Docket Number: No. 05-6903.,05-6903.
• Citation: 480 F.3d 779
• Parties: CAREMARK, INC., a California Corporation, Plaintif-Appellant, v. David GOETZ, in his official capacity as Commissioner of the Tennessee Department of Finance and Administration; Jason D. Hickey, in his official capacity as Deputy Commissioner of the Bureau of TennCare, Defendants-Appellees, United States of America, Intervenor-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

480 F.3d 779

CAREMARK, INC., a California Corporation, Plaintif-Appellant, v. David GOETZ, in his official capacity as Commissioner of the Tennessee Department of Finance and Administration; Jason D. Hickey, in his official capacity as Deputy Commissioner of the Bureau of TennCare, Defendants-Appellees United States of America, Intervenor-Appellee.

No. 05-6903.

United States Court of Appeals, Sixth Circuit.

Argued: October 24, 2006.

Decided and Filed: March 13, 2007.

ARGUED:

Jennifer L. Weaver, Waller, Lansden, Dortch & Davis, Nashville, Tennessee, for Appellant. Peter M. Coughlan, Office of the Attorney General, Nashville, Tennessee, for Appellees. Tara Leigh Grove, United States Department of Justice, Washington, D.C., for Intervenor.

ON BRIEF:

Jennifer L. Weaver, Paul S. Davidson, Waller, Lansden, Dortch & Davis, Nashville, Tennessee, for Appellant. Peter M. Coughlan, Office of the Attorney General, Nashville, Tennessee, for Appellees. William Kanter, Anne Murphy, United States Department of Justice, Washington, D.C., for Intervenor.

Before: KEITH and COLE, Circuit Judges; STEEH, District Judge.^*

OPINION

DAMON J. KEITH, Circuit Judge.

Plaintiff-Appellant Caremark, Inc. ("Caremark") appeals the district court's judgment denying Caremark's motion for summary judgment and granting summary judgment in favor of Defendants-Appellees David Goetz and Jason D. Hickey, sued in their official capacities as Commissioner of the Tennessee Department of Finance and Administration, and Deputy Commissioner of the Bureau of TennCare ("TennCare"), respectively, (collectively "TennCare"); and Intervenor-Appellee the United States of America. Caremark specifically challenges the district court's declaration that the Bureau of TennCare's third-party claims for Medicaid reimbursement are not subject to certain "card presentation" and "timely filing" restrictions contained in the pharmacy-benefit plans administered by Caremark. For the reasons set forth below, we AFFIRM the district court's judgment.

BACKGROUND

I. Factual Background

Caremark is a pharmaceutical-services company that contracts with health-benefit plan providers to supply prescription drug distribution and claim processing to plan participants. In addition to operating its own mail-service pharmacies, Caremark has contracted with retail pharmacy chains and independent retail pharmacies to form a network of more than 57,000 retail pharmacies. TennCare is the state agency that provides health care coverage to individuals eligible for Medicaid benefits in Tennessee.

The Caremark-administered pharmacy benefit plans at issue contain two relevant plan limitations that impact the payment of claims: (1) the card presentation restriction and (2) the timely filing restriction.¹ When a plan has a card presentation restriction, Caremark will decline to provide any prescription drug benefits if the participant does not identify himself or herself as a Caremark plan participant at the time of sale. Identification as a plan participant is usually achieved by presenting a Caremark card.

Other Caremark plans allow participants to obtain their prescription drugs at retail pharmacies without identifying themselves as plan participants. Under such plans, the participant pays for the prescription drugs out-of-pocket and then seeks reimbursement from Caremark. These plans are subject to a timely filing requirement, whereby a participant who seeks reimbursement for the out-of-pocket expenditure must submit his or her request within a prescribed period of time. A plan may designate a filing period of any length, even a period as short as a few days.

Some Caremark pharmacy-plan participants are also eligible for Medicaid (so-called "dual eligibles").² In Tennessee, when a dual eligible purchases prescription drugs at a retail pharmacy and presents only his or her Medicaid card, the pharmacy sends a claim to TennCare. When TennCare is unaware of any third-party liability (any other source of pharmacy-benefit coverage, such as Caremark coverage), it pays the claim for the Medicaid beneficiary. If, however, TennCare discovers that the beneficiary is also covered by a Caremark plan after a claim is paid, it submits a third-party reimbursement request to Caremark pursuant to 42 U.S.C. § 1396a(a)(25), a process called "pay and chase."

When TennCare seeks reimbursement for a dual eligible enrolled in a Caremark plan that has a card presentation requirement, Caremark will reject the reimbursement request on the grounds that a Caremark card was not presented at the point of sale. Similarly, when TennCare submits a reimbursement request for a dual eligible enrolled in a Caremark plan with a timely filing requirement, Caremark routinely denies TennCare's request as untimely. Since TennCare cannot file a claim for reimbursement until it receives a claim from the pharmacy and subsequently discovers that the beneficiary is also covered by Caremark, TennCare is often unable to file its claim for reimbursement within the time limit set by the Caremark plan.

II. Procedural Background

On December 13, 2004, Caremark filed an action against TennCare in the district court seeking a declaratory judgment that TennCare's third-party claims are subject to certain pharmacy-benefit plan restrictions (including the card presentation and timely filing restrictions) applicable to individual plan participants. The United States successfully moved to intervene in the case on March 7, 2005. On the same date, TennCare filed a counterclaim seeking a declaratory judgment (1) that Caremark has denied reimbursement to TennCare by improperly applying its card presentation and timely filing restrictions against TennCare, in violation of the Medicaid statute, 42 U.S.C. § 1396, et seq. and the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1169(b).

On July 8, 2005, TennCare, Caremark, and the United States filed cross-motions for summary judgment. On October 18, 2005, the district court granted TennCare's and the United States's motions for summary judgment and denied Caremark's motion for summary judgment. Caremark, Inc. v. Goetz, 395 F.Supp.2d 683 (M.D.Tenn.2005). Specifically, the district court found that a Tennessee Medicaid beneficiary's statutory assignment of rights to TennCare occurs at the time the beneficiary requests covered goods or services, and thus the card presentation and timely filing restrictions set forth in Caremark-administered pharmacy-benefit plans do not apply to TennCare's requests for reimbursement from Caremark. Id. at 695-96. The present appeal ensued.

STANDARD OF REVIEW

"This Court reviews a grant of summary judgment de novo." Howard ex rel. Estate of Howard v. Bayes, 457 F.3d 568, 571 (6th Cir.2006). Because the denial of Caremark's motion for summary judgment was "decided on purely legal grounds," we also review that decision de novo. Citizens Ins. Co. of Am. v. MidMichigan Health ConnectCare Network Plan, 449 F.3d 688, 691 (6th Cir.2006). Moreover, statutory interpretation questions are reviewed de novo. Cmtys. for Equity v. Michigan High School Athletic Ass'n, 459 F.3d 676, 680 (6th Cir.2006) (citing Ammex, Inc. v. United States, 367 F.3d 530, 533 (6th Cir.2004)).

ANALYSIS

Medicaid is a program, created in 1965 under Title XIX of the Social Security Act, that pays for medical and health-related assistance for certain low-income individuals and families. See 42 U.S.C. § 1396, et seq. Medicaid is a joint federal and state program, which is administered by the states but financed with both state and federal funds. 42 U.S.C. § 1396a(b). Unless otherwise provided by federal law, Medicaid is considered to be the payor of last resort. See Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 281 (2d Cir.2001); S.Rep. No. 99-146, 280, 99th Cong., 1 st Sess. 312 (Oct. 2, 1985). This means that all other available resources must be used before Medicaid pays for the medical care of an individual enrolled in a Medicaid program. Thus, when a dual eligible purchases prescription drugs, Caremark is the primary payor and TennCare is only a secondary payor.

Federal law requires every state participating in a Medicaid program to implement a "third party liability" provision that requires the state to seek reimbursement for Medicaid expenditures from third parties who are liable for medical treatment provided to a Medicaid recipient. 42 U.S.C. § 1396a(a)(25)(A). A state plan also must provide that, as a prerequisite to Medicaid eligibility, the applicant must assign to the state whatever rights he or she may have to payment for pharmaceutical costs paid by the state plan on behalf of dual eligibles. 42 U.S.C. § 1396k(a)(1)(A); 42 C.F.R. § 433.145(a). Federal law further requires group health plans to "provide that payment for benefits with respect to a participant under the plan will be made in accordance with any assignment of rights made by or on behalf of such participant or beneficiary of the participant[.]" 29 U.S.C. § 1169(b)(1).

In accordance with the aforementioned federal law, Tennessee law provides that "the state shall be subrogated to all rights of recovery" that Medicaid recipients may have against any third parties, Tenn.Code Ann. § 71-5-117(a) (2003), and that "[u]pon accepting medical assistance, the recipient shall be deemed to have made an assignment to the state of the right of third party insurance benefits to which the recipient may be entitled." Id. § 71-5-117(b). Tennessee's regulations provide that claims should not be made against Medicaid until "other probable third party resources to the recipient have been collected[.]" Tenn. Comp. R. & Regs. § 1200-13-1-.04(2) (2002). Tennessee regulations specifically authorize the state's Medicaid agency, TennCare, to seek reimbursement from third parties, such as Caremark, by means of "direct billing when it is determined that a previously paid service(s) [sic] may have been covered by a third party." Id. §...