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While there have been reforms in the marketing of Private Medicare Advantage (MA)[1] plans,[2] problems remain.  Plans continue to use aggressive or fraudulent tactics to enroll Medicare beneficiaries.  In some instances, plans have told Medicare beneficiaries that they are required by Medicare to enroll in an MA plan; other plan representatives tell beneficiaries that they are buying only supplementary insurance (Medigap).  Beneficiaries with cognitive disabilities such as dementia have been enrolled in plans without the knowledge or consent of their legal representatives.[3]   

In addition to the legislative and regulatory changes against fraudulent marketing practices mandated by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MIPPA), federal courts are limiting the reach of federal "preemption" under the Medicare statute.[4]  "Preemption" occurs when a federal court determines that it is the court of jurisdiction to hear a case that was originally brought in state court because federal law supersedes state law in the case in question.  In the Medicare arena, preemption has largely been at issue when private plans sought to find ways around state consumer protection laws and claims brought against them in state court.  One method used by plans to avoid the application of state consumer protection laws is removing cases to federal court.  Several decisions show a trend toward narrowing the reach of federal preemption law, allowing consumer protection cases to proceed in state courts.[5]  A recent example of this trend is Ackermann v. United Healthcare Service, Inc.[6]

In Ackermann, plaintiffs claimed that a home health agency employee stole Mr. Ackermann's personal information and enrolled him in a Medicare Advantage plan, thereby taking him out of the traditional Medicare program against his will.  The Ackermanns brought suit in state court and the defendants tried to have the case removed to federal district court.  The federal district court recently remanded the case to state court, citing a lack of jurisdiction.  The court stated, "[the] plaintiffs' state law claims…are neither completely preempted by, nor 'inextricably intertwined' with claims under the Medicare Act…."[7]

Complete Preemption and Where to Litigate

Complete preemption "is a narrowly drawn jurisdictional rule for assessing federal removal jurisdiction when a complaint purports to raise only state law claims."[8]  Complete preemption becomes an issue when, even though a case supposedly concerns only state law, the area of law in question is so heavily pervaded by federal law that the federal court automatically exercises jurisdiction.   

Complete preemption is difficult to prove.  In Harris v. Pacific Life & Health Insurance,[9] for example, plaintiffs filed an action in state court for common-law fraud and other state law claims arising from the sale of a Medicare insurance policy.  The defendants sought to dismiss the case based on preemption or, in the alternative, to remove the case to federal court.  In ruling against defendants on the issue of preemption, the Harris court pointed to Geddes v. American Airlines, Inc.,[10] which held that a federal law could substantively displace state law and still not have the force needed to create "federal removal jurisdiction under the doctrine of complete preemption."[11]  Harris held that complete preemption was not proper because the state law fraud claims are not preempted by the Medicare Act.   

Preemption and the Medicare Statute

Although the issue of complete preemption of state consumer protection laws against fraudulent MA practices is relatively new, the recent trend in federal court decisions is that the Medicare statute[12] does not allow for complete preemption.

In Ackermann v. United Healthcare Service Inc.,[13] defendants based their arguments for removal to federal court largely on language in the Medicare statute, 42 U.S.C. 1395w-26(b)(3), which states: "The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to [private Medicare] plans which are offered by [Medicare Advantage] organizations under this part."  The Harris court interpreted this provision of the Medicare statute as not applying to state common-law claims for purposes of complete preemption.  The Ackermann court agreed.

Defendants in Ackermann claimed that the Medicare Act completely preempted state law claims because the plaintiffs' claims concerned the denial of Medicare benefits to be provided by the MA plan under Medicare Part C, and disenrollment from traditional Medicare.  The court cited Harris,[14] to show that state law fraud claims are not automatically preempted when there is a provision in a statute that allows federal law to control on most Medicare-related issues. 

The court also said that the state law claims brought by the Ackermanns were not "inextricably intertwined" with a Medicare benefits claim.  The court stated "plaintiffs are not complaining about the denial of benefits under the Medicare Part C plan."[15]  In its holding, the court found that the plaintiffs' claim was not that they were denied a Medicare benefit, but rather that the plaintiffs did not want Medicare Part C (Medicare Advantage) at all.  The plaintiffs' claims were based on having been fraudulently enrolled in a plan they did not want.  Thus, the court found that there was nothing present to give the federal court subject matter jurisdiction.        

Conclusion

The rulings in Ackermann and Harris pave the way for broader use of state consumer protection laws in addressing fraudulent and misleading MA plan enrollment practices.  The cases clarify that state consumer protection laws are not necessarily preempted by the Medicare statute.  In addition, the cases put Medicare Advantage plans on notice that they can now be held accountable directly to Medicare beneficiaries under state law.  As a result, they provide an additional incentive against engaging in the fraudulent marketing practices that have continued despite repeated efforts at reform.