MA Assoc. of Health Maintenance Organizations v. Ruthardt
| Citation | 194 F.3d 176 |
| Decision Date | 13 September 1999 |
| Docket Number | No. 99-1133,99-1133 |
| Parties | (1st Cir. 1999) MASSACHUSETTS ASSOCIATION OF HEALTH MAINTENANCE ORGANIZATIONS, PLAINTIFF, APPELLEE, v. LINDA RUTHARDT, COMMISSIONER OF INSURANCE, DEFENDANT, APPELLANT. Heard |
| Court | United States Courts of Appeals. United States Court of Appeals (1st Circuit) |
Thomas A. Barnico, Assistant Attorney General, Commonwealth of Massachusetts, with whom Thomas F. Reilly, Attorney General, was on brief, for appellant.
Clare D. McGorrian and Health Law Advocates on brief for Mass. Senior Action Council, Health Care for All, Inc., Disability Law Center, Gerontology Institute of the University of Mass.-Boston, Center for Medicare Advocacy, Alzheimer's Disease and Related Disorders Ass'n of Eastern Mass., and Aids Action Committee of Mass., amici curiae.
John T. Montgomery, with whom Richard S. Weitzel and Ropes & Gray were on brief, for appellee.
Before Selya, Circuit Judge, Bownes, Senior Circuit Judge, and Lipez, Circuit Judge.
The Commonwealth of Massachusetts requires organizations that offer Medicare beneficiaries supplemental health care insurance to provide full prescription drug coverage. When the federal government enacted legislation that imposed its own imperatives on such organizations, an association of health care providers sought a declaration that the federal scheme preempted the Massachusetts drug-benefit directive. The United States District Court for the District of Massachusetts, ruling ore tenus, found preemption. We affirm.
If social programs are meant to furnish a safety net, Medicare is a notoriously porous one. A main cause of this porosity is that most outpatient prescription drugs are not covered. As a result, Medicare beneficiaries who desire such coverage must either purchase supplemental private insurance or enroll in a health maintenance organization (HMO). For many years, Massachusetts HMOs, like their counterparts elsewhere, offered benefit options ranging from no coverage for prescription drugs to full coverage. Then, in a bold stroke designed to improve health care for the elderly and disabled, the Massachusetts legislature passed a law commanding all supplemental providers to offer at least one plan that includes unlimited outpatient prescription drug coverage. See Mass. Gen. Laws Ann. ch. 176K (West 1998) (effective Jan. 14, 1994); Mass. Regs. Code tit. 211, § 71.23 (1998) (effective Jan. 1, 1995).
The Medicare program, 42 U.S.C. §§ 1395-1395ggg (1999), remains a work in progress. Since its inception in 1965, Congress has made countless modifications to it. Continuing in this mode, Congress, as part of the fiscal 1997 budget bill, established the Medicare+Choice Program (the Program). See Balanced Budget Act of 1997 (BBA), Pub. L. No. 105-33 § 4001, 111 Stat. 251, 275-328 (). Participation in the Program is conditioned on providers offering basic Medicare benefits, meeting certain other statutorily defined criteria, and neither charging more in premiums nor furnishing less in supplemental benefits than the levels established through regulation by the Secretary of Health and Human Services (the Secretary). See 42 U.S.C. §§ 1395w-22, w-24, w-25, w-26.
The BBA includes the following provisions discussing the Program's preemptive effect:
(b) Establishment of other standards
(3) Relation to state laws
The standards established under this subsection shall supersede any State law or regulation (including standards described in subparagraph (B)) with respect to Medicare + Choice plans which are offered by Medicare + Choice organizations under this part to the extent such law or regulation is inconsistent with such standards.
State standards relating to the following are superseded under this paragraph:
(i) Benefit requirements.
(ii) Requirements relating to inclusion or treatment of providers.
(iii) Coverage determinations (including related appeals and grievance processes).
Id. § 1395w-26.
In April 1998, the Massachusetts Commissioner of Insurance (the Commissioner), undaunted by the BBA, announced that the Commonwealth would continue to require supplemental providers to offer full prescription drug coverage. See Bulletin No. 98-03 (Apr. 17, 1998). In June 1998, the Secretary published an interim final rule interpreting subparagraph (B) of section 1395w-26 to nullify state benefit requirements (even those that are not inconsistent with federal standards). See 63 Fed. Reg. 34,968, 35,099 (June 26, 1998) (codified at 42 C.F.R. § 422.402 (1998)). This rule remains in effect. See 64 Fed. Reg. 7968 (Feb. 17, 1999). Massachusetts promptly proclaimed that it would defy the federal regulation and continue to enforce its drug-benefit requirement "absent a judicial determination that any state law is preempted." Bulletin No. 98-07 (July 20, 1998).
The Commonwealth's intransigence led the Massachusetts Association of HMOs (the Association) to seek a declaration that the BBA and the Secretary's rule preempt the Commonwealth's full drug coverage requirement. The federal district court obliged. The Commissioner appeals.
We begin by mapping the legal terrain and then turn to the topography of the case at hand.
The Supremacy Clause provides that federal law "shall be the supreme Law of the Land; . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2. By virtue of this commandment, state law that conflicts with federal law is a nullity. See Maryland v. Louisiana, 451 U.S. 725, 746 (1981); Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 210-11 (1824); M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 427 (1819); Greenwood Trust Co. v. Massachusetts, 971 F.2d 818, 822 (1st Cir. 1992).
Preemption is strong medicine. Thus, although the power to preempt is absolute, its exercise is not lightly to be presumed. See Gregory v. Ashcroft, 501 U.S. 452, 460 (1991). Rather, courts "start with the assumption that the historic police powers of the States [are] not to be superseded by . . . Federal Act unless that [is] the clear and manifest purpose of Congress." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). It follows inexorably that congressional intent stands at the base of all preemption analysis. See Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992).
The Supreme Court generally distinguishes between express and implied theories of preemption. Express preemption occurs "when Congress has 'unmistakably . . . ordained' that its enactments alone are to regulate a [subject, and] state laws regulating that [subject] must fall." Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977) (quoting Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 (1963)). Implied preemption is more elusive; that concept "has a certain protean quality, which renders pigeonholing difficult." French v. Pan Am Express, Inc., 869 F.2d 1, 2 (1st Cir. 1989). Generally speaking, implied preemption encompasses both "field" and "conflict" preemption principles. The former set of principles reflects the view that Congress's intent to occupy a given field can be inferred from the pervasiveness of federal regulation and/or the dominance of the federal interest in a particular area of legislative activity. See Rice, 331 U.S. at 230; French, 869 F.2d at 2. By contrast, the latter set of principles reflects the idea that congressional intent also can be deduced from circumstances such as inconsistency or impossibility. 1 See Gade v. National Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98 (1992) (plurality op.).
The Court recently offered additional guidance on the proper approach to statutes that include explicit preemption language. In Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), the Justices explained that although an express preemption clause may indicate congressional intent to preempt "at least some state law," courts nonetheless must "identify the domain expressly pre-empted by that language." Id. at 484 (citation and internal quotation marks omitted). Two presumptions inform the process of determining the scope of an express preemption clause. First, the familiar assumption that preemption will not lie absent evidence of a clear and manifest congressional purpose must be applied not only when answering the threshold question of whether Congress intended any preemption to occur, but also when measuring the reach of an explicit preemption clause. See id. at 485. Second, while the scope determination must be anchored in the text of the express preemption clause, congressional intent is not to be derived solely from that language but from context as well. See id. at 486 (); accord California Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 284 (1987) ( that, in such circumstances, a court "must examine the language against the background of its legislative history and historical context").
Against this legal landscape, we turn to the merits. Our review is plenary. See Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 (1st Cir. 1997).
On its own, section 1395w-26(b)(3)(B) appears to reflect an unqualified congressional desire to preempt state standards relating to, inter alia, benefit requirements. The following excerpt drives the point home:
State standards relating to the following are superseded under this paragraph:
(i) Benefit requirements.
(ii) Requirements relating to inclusion or treatment of providers.
(iii) Coverage determinations (including related appeals...
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