Medicaid & Medicare Advantage Prods. Ass'n v. Emanuelli-Hernández

MEDICAID AND MEDICARE ADVANTAGE PRODUCTS ASSOCIATIONOF PUERTO RICO, INC. ET AL., Plaintiffs, v. DOMINGO EMANUELLI-HERNÁNDEZ ET AL., Defendants.

CIV. NO.: 19-1940 (SCC)

UNITED STATES COURT FOR THE DISTRICT OF PUERTO RICO

March 1, 2021

OMNIBUS OPINION AND ORDER

This matter arises from the government of Puerto Rico's attempt to address a major public health crisis afflicting the island for more than a decade: the mass exodus of medical professionals in pursuit of better economic opportunity elsewhere in the United States. However, in a display of the complexities of federalism, that worthy purpose has come into direct conflict with the public policy of the U.S. Congress in creating the Medicare Advantage program, resulting in the lawsuit before us today.

Plaintiffs Medicaid and Medicare Advantage Products Association of Puerto Rico, Inc. ("MMAPA"), MMM Healthcare, LLC ("MMM"), Triple-S Advantage, Inc. ("Triple-S"), MCS Advantage, Inc. ("MCS") and Humana Health Plans of Puerto Rico, Inc. ("Human") sued the Attorney General and Insurance Commissioner of the Commonwealth of Puerto Rico ("Government Defendants")¹ in this Court. Plaintiffs alleged, inter alia, that the amendment to the Puerto Rico Insurance Code that added regulations to Medicare Advantage as administered in Puerto Rico and was aimed at addressing the flight of medical professionals from the island, Subsection 7 of Puerto Rico Act 90-2019, is preempted by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 42 U.S.C. § 1395w-21 et seq. See Docket No. 1.

The remaining defendants intervened as a matter of right under Federal Rule of Civil Procedure 24(a)(2). See Docket Nos. 15, 26, 49, 72 and 90. Those parties consist of Asociación de Hospitales de Puerto Rico, Inc. ("AHPR"), Mennonite General Hospital, Inc. ("Mennonite"), Hospital Menonita Caguas, Inc. ("Menonita Caguas"), Hospital Menonita Guayama, Inc. ("Menonita Guayama"), San Jorge Children's Hospital ("San Jorge"), Clinical Laboratories Association Inc. ("CLA"), Puerto Rico Association of Radiology Imaging Centers Inc. ("PRARIC") and the Puerto Rico College of Physicians-Surgeons ("CMCPR") (collectively, the "Intervenor Defendants").

Pending before the Court are the Government Defendants' Motion to Dismiss at Docket Number 32; Plaintiffs' Cross-Motion for Summary Judgment at Docket Number 48²; Plaintiffs' Motion to Dismiss Counterclaims at Docket Number 110; and Plaintiffs' Motion for Expedited Decision on Pending Motions or, in the alternative, for Preliminary Injunction at Docket Number 114. All Defendants opposed Plaintiffs' Cross-Motion for Summary Judgment, see Docket Numbers 58 and 76, and the Government Defendants and several Intervening Defendants opposed Plaintiffs' Motion for Preliminary Injunction, see Docket Numbers 123 and 125.

Because Plaintiffs' Cross-Motion for Summary Judgment does not rely on any facts beyond those iterated in the pleadings, we convert that motion into a Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c).³ Virtually no discovery has yet been conducted in this case, and therefore no factual record beyond the Complaint and subsequent pleadings exists upon which the Court may rely in making its rulings, making summary judgment premature. Plaintiffs even acknowledge as much in their Cross-Motion for Summary Judgment, before ultimately filing a skeletal Statement of Undisputed Facts in compliancewith Local Rule 56(b) of this Court reciting the allegations from their Complaint. See Docket Nos. 48, pg. 11 n.2 and 105. Thus, the Court will treat Plaintiffs' Cross-Motion for Summary Judgment as a Rule 12(c) Motion for Judgment on the Pleadings.⁴

For the reasons stated herein, the Government Defendants' Motion to Dismiss at Docket Number 32 is DENIED, Plaintiffs' Motion for Judgment on the Pleadings (formerly a Cross-Motion for Summary Judgment) at Docket Number 48 is GRANTED and the remaining pending motions at Docket Numbers 110 and 114 are MOOT.

I. Factual and Procedural Background

Unless otherwise indicated, we derive the following factual summary from Plaintiffs' Complaint, Docket Number 1. As we must at the motion-to-dismiss stage, we construe all of Plaintiffs' factual allegations as true and make all reasonable inferences in their favor. Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16 (1st Cir. 1998).

Medicare is a federal health insurance program established under Title XVIII of the Social Security Act for people over 65 years old and certain other qualifying beneficiaries. See Docket No. 1, ¶ 24. It is administered by theCenters for Medicare and Medicaid Services ("CMS"), an agency within the U.S. Department of Health and Human Services, and consists of four parts, one of which is most relevant here: Part C, also known as Medicare Advantage ("MA"). See id. at ¶¶ 25, 26.c. Under MA, private insurance companies contract with CMS to provide Medicare benefits, as well as coverage outside of Medicare. See id. at ¶ 26.c.

Under the traditional Medicare program, the government pays healthcare providers directly based on a fee-for-services schedule devised by CMS. See id. at ¶ 29. However, under MA, as revised by the Medicare Drug, Improvement and Modernization Act of 2003, 42 U.S.C. § 1395w-21 et seq (the "Medicare Advantage Act" or "Medicare Part C"), CMS contracts with the private Medicare Advantage organizations ("MAOs" or "MA plans"), who in turn contract with healthcare providers, to provide bundled Medicare plans to MA beneficiaries. See id. at ¶¶ 30-32. The MA scheme thus expanded Medicare beneficiaries' insurance choices to include private plans with coordinated care and more comprehensive benefits than those provided under traditional Medicare. See id. at ¶ 33.

Unlike the payment structure under traditional Medicare, MAOs do not receive fee-for-service reimbursements from the government for the services to their enrollees. See id. at ¶ 34. Instead, they receive a per-person monthly payment to provide coverage for all Medicare-covered benefits to beneficiaries enrolled in the plan, a payment determined by CMS based on the difference between a plan's bid and the federal benchmark. See id. If the plan's bid is less than the benchmark, its payment from CMS is the bid plus a rebate, which must be returned to enrollees in the form of additional benefits or other options. See id. at ¶ 35. If the plan's bid is equal to or above the benchmark, its payment is the benchmark amount, and each enrollee in that plan will incur an additional premium to cover the amount by which the bid exceeded the benchmark. See id.

This payment structure was intended by Congress to improve "'the range of benefit choices available to enrollees and the opportunity to share in savings where MA plans can deliver benefits at lower costs,' to '[e]xpand the number and type of plans provided for, so that beneficiaries can choose from [different] types of plans,' and to '[u]se open season competition among MA plans to improve service, improve benefits, invest in preventative care and hold costs down in ways that attract enrollees.'" Id. at ¶ 37 (quoting Medicare Program; Establishment of the Medicare Advantage Program; Final Rule, 70 Fed. Reg. 4589 (Jan. 28, 2005)).

Indicative of just how far-reaching the implications of the outcome of this matter are, there are a myriad of parties participating in this case, including several intervening defendants. For purposes of clarity, we briefly sketch out the identity of those parties and the various claims and counterclaims that they have brought against one another.

A. The Parties

The Plaintiffs in this matter are made up of MMAPA, a trade organization that represents the leading MAOs of Puerto Rico, and several of its members, MMM, Triple-S, MCS and Humana (the "MAO Plaintiffs"). See Docket No. 1, ¶ 15. The MAO Plaintiffs, in turn, are private licensed health maintenance organizations ("HMOs") that have contracts with CMS, the federal agency that partners with the States to administer Medicaid, Medicare and other government healthcare programs. See id. at ¶¶ 16-21. Pursuant to those contracts, the MAO Plaintiffs offer Medicare Advantage ("MA") to the residents of Puerto Rico through various healthcare providers across the island. See id.

The Commonwealth of Puerto Rico is represented by the Secretary of the Department of Justice and Insurance Commissioner of the Commonwealth of Puerto Rico. The Intervenor Defendants consist of various healthcare providers, or organizations made up of those providers, that provide medical services to Medicare Advantage enrollees in Puerto Rico and have contracts with the MAO Plaintiffs to do so. See Docket Nos. 15, 26, 49, 72 and 90. These Intervenor Defendants represent an enormous number of medical services providers across the island: AHPR is a trade organization comprised of sixty-seven of the seventy-seven hospitals currently operating in Puerto Rico, as well as over seventy other members providing healthcare services, see Docket No. 15, pgs. 1-2; CLA and PRARIC represent over 120 laboratories and over forty radiology imaging centers, respectively, see Docket No. 68, Exs. 1 and 2; and CMCPR is a compulsory membership association made up of approximately 9,000 physicians licensed to practice medicine in Puerto Rico, see Docket No. 72.

B. The Claims and Counterclaims

Plaintiffs' principal claim is that Subsection 7 of Puerto Rico Act 90-2019 P.R. Laws Ann. Tit. 26, § 1915 ("Act 90-2019"), is preempted, whether expressly or under the principle of conflict preemption by Medicare Part C. See Docket No. 1, ¶¶ 57-67. They argue that Medicare Part C contains an express-preemption provision that holds that the Medicare Advantage Act supersedes any State laws regulating MA plans. See id. at ¶ 58; 42 U.S.C. § 1395w-26(b)(3). In Plaintiffs' view, Subsection 7, which prohibits MAOs from agreeing on fees lower than those established by CMS when contracting with...