The California Supreme Court handed a victory to insurance companies on Thursday, ruling that Medicare recipients are limited to federal remedies when pursuing claims against Medicare Advantage organizations.

The case titled Quishenberry v. UnitedHealthcare, Inc. concerns a Medicare Advantage (MA) recipient who died after being discharged from a skilled nursing care facility. The Medicare enrollee’s son sued his late father’s HMO plan and healthcare services administrator, alleging his father was improperly discharged. He claimed the plan and administrator breached their duty to ensure the patient received the proper skilled nursing benefits to which he was entitled under the Medicare plan.

The plaintiff alleged negligence, wrongful death, and elder abuse, all claims sounding in state law. The defendants argued that the plaintiff’s claims were preempted by federal Medicare statutes and should be dismissed as a matter of law.

Preemption is a legal doctrine that applies when federal law and state law conflict. Because of the Supremacy Clause of the United States Constitution, a controlling federal law will displace, or preempt, an otherwise applicable state law. Preemption can be applied in several different ways: federal law can preempt specific issues on which a state law may touch; Congress can declare that an entire field is meant for federal, rather than state, control; or federal law can set outside boundaries that state law can supplement so long as the state’s rules do not conflict with federal standards. A federal law may explicitly state that it preempts any conflicting or related state law, or a court may determine that the structure and purpose of a federal law implicitly preempts related state laws.

In Quishenberry, the defendants argued that the Medicare Act preempted the plaintiff’s state law claims against Medicare Advantage organizations. On appeal, the California Supreme Court agreed.

As explained by the Court, Medicare Part C allows Medicare beneficiaries to “sign up for a privately administered health care plan,” an MA plan, that “provides all of the Part A and B benefits as well as additional benefits.” The government pays the plan’s administrator to “provide all Medicare benefits for that beneficiary.”

The government’s actual responsibility at that point is simply to pay the monthly fee; the private health plan takes on the actual risks associated with insuring the beneficiary. Medicare Part C and implementing federal regulations lay out several standards to which participating MA organizations must adhere.

The court held that Medicare Part C expressly preempted the plaintiff’s state law claims against MA organizations. According to the court, Medicare Part C’s preemption language directly supersedes the state law remedies sought by the plaintiff: “The standards established under” Part C “shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations.” The Court emphasized that the applicable language “preempts a broad swath of state laws” in order to “protect the purely federal nature of Medicare Advantage plans.” Preemption applies to both state statutes and state common-law (judge-made) remedies.

According to the Court, Congress included Part C’s preemption clause to ensure “national uniformity” in Medicare administration. The legislature did not want to subject national MA organizations to different rules within each jurisdiction, a result the Court feared would increase costs, “stifle innovation, drive up prices for consumers, and constrain the job-creating powers of American businesses.”

The Court further held that the plaintiff’s claims would have been impliedly preempted by the Medicare Act, even if the express preemption language did not apply. The plaintiff sought to enforce the very standards established by Medicare Part C, “but he did not raise his objections through the Medicare Act’s review process.” MA enrollees must go through the full administrative process before seeking judicial review. The plaintiff “cannot, consistent with federal law, forgo this review procedure and substitute a state court’s or jury’s judgments for those of the federal decisionmakers that Congress selected to review Part C coverage determinations.”

In practice, the Court’s ruling forbids Medicare enrollees from pursuing state-law tort claims against entities providing Medicare benefits. States like California provide additional protections for patients and insurance policyholders that are not available under federal law. For example, remedies available under California state law that would not be available under the Medicare Act could include compensatory damages that make up for the economic and non-economic harm caused by the insurance company’s negligence, such as increased medical costs and pain and suffering caused by insurance company decisions that negatively impact patient health. and California law further allows for punitive damages in a claim of bad-faith insurance or negligence when the insurer acted with malice, fraud or oppression.

California insurance bad faith attorney Robert Gianelli lamented the court’s recent decision, arguing that it leaves Medicare recipients with fewer remedies than other policyholders--even those with plans administered by the same insurance providers. “Medicare recipients,” Mr. Gianelli contended, “should have the same protections against bad-faith insurance conduct as patients covered by private health care plans.”