Massachusetts v. Ruthardt
Case Date: 10/08/1999
Court: United States Court of Appeals
Docket No: 99-1133
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For the First Circuit No. 99-1133 MASSACHUSETTS ASSOCIATION OF HEALTH MAINTENANCE ORGANIZATIONS, Plaintiff, Appellee, v. LINDA RUTHARDT, COMMISSIONER OF INSURANCE, Defendant, Appellant. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Richard G. Stearns, U.S. District Judge] Before Selya, Circuit Judge, Bownes, Senior Circuit Judge, and Lipez, Circuit Judge. 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. October 8, 1999 SELYA, 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. I. BACKGROUND 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 (codified at 42 U.S.C. 1395w-21 to w-28). 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 (A) In general 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. (B) Standards specifically superseded 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. II. ANALYSIS We begin by mapping the legal terrain and then turn to the topography of the case at hand. A. An Overview. 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. 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 (acknowledging as "relevant" data "the structure and purpose of the statute as a whole, as revealed not only in the text, but through the reviewing court's reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers, and the law" (citations and internal quotation marks omitted)); accord California Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 284 (1987) (explaining that, in such circumstances, a court "must examine the [act's] language against the background of its legislative history and historical context"). B. The Merits. 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). 1. 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 and grievance processes). Noting that the Commissioner does not dispute that the Massachusetts law and regulation mandating a full prescription drug coverage option are "state standards relating to . . . benefit requirements," the Association invites us to declare that the quoted passage ends the matter. We decline the Association's invitation to read subparagraph (B) as an entirely free-standing statutory provision for two reasons. For one thing, the text of the subparagraph includes the phrase "under this paragraph." The Association attempts to slough off these words as "nothing more than a drafting formality, akin to stating 'hereunder,'" and optimistically suggests that the phrase refers only to the paragraph's title ("Relation to state laws") and not to the conjoined subparagraphs that together constitute "this paragraph." Appellee's Brief at 24 n.5. Although it is true that courts sometimes rely on the titles of statutory enactments in plumbing their meaning, see, e.g., United States v. Chapman, 60 F.3d 894, 897-98 (1st Cir. 1995), that practice should not be indulged at the expense of the text itself. For another thing, even if subparagraph (B) included no external referent, we would consider ourselves obliged to examine the statutory provision in context. See Medtronic, 518 U.S. at 486; see also O'Connell v. Shalala, 79 F.3d 170, 176 (1st Cir. 1996) (warning that statutory construction should never proceed by "focus[ing] with Cyclopean intensity" on a single provision). What, then, does it mean to be "superseded under this paragraph"? The Commissioner accurately observes that the paragraph includes subparagraph (A), which provides: 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. [Emphasis supplied.] From the parenthetical reference to subparagraph (B), the Commissioner deduces that subparagraph (A) circumscribes the preemptive scope of subparagraph (B) by applying a conflict preemption regime to all state standards, including those that relate to benefit requirements. Because Massachusetts law insists upon additional benefits, her thesis runs, it is not inconsistent with federal law. See, e.g., 42 U.S.C. 1395w-22(a)(1)(B) (mandating that Medicare+Choice plans shall provide additional benefits required under section 1395w-24(f)(1)(A)); id. 1395w- 24(f)(1)(E) (clarifying that nothing in subsection 1395w-24(f) shall be construed as preventing organizations from providing supplemental benefits described in section 1395w-22(a)(3)); id. 1395w-22(a)(3)(C) (similarly emphasizing that organizations may provide additional benefits). Thus, the Commonwealth's ukase should be allowed to operate ex proprio vigore. The Commissioner's interpretation possesses a patina of plausibility. In the last analysis, however, it would diminish subparagraph (B) to a list of examples a role that the text and context of the subparagraph belie. This subparagraph declares that certain state standards "are" superseded under the paragraph; it does not intimate that these standards "may" be preempted if the Secretary promulgates particular types of regulations. As a general matter, we are loath to reduce statutory language to a merely illustrative function, and the language of this subparagraph does not readily invite a departure from that norm. This is particularly true when we recollect that "[a]ll words and provisions of statutes are intended to have meaning and are to be given effect, and no construction should be adopted which would render statutory words or phrases meaningless, redundant or superfluous." United States v. Ven-Fuel, Inc., 758 F.2d 741, 751- 52 (1st Cir. 1985). Though a list of examples is not necessarily superfluous Congress may consider a specific point important or uncertain enough to justify a modicum of redundancy the surrounding statutory framework compels a finding of superfluity in the case of subparagraph (B). In the same subsection, the Secretary is enjoined to "establish by regulation . . . standards . . . for Medicare + Choice organizations and plans . . . to carry out this part," 42 U.S.C. 1395w-26(b)(1), and the subject areas enumerated in subparagraph (B) are unquestionably central to the Medicare+Choice program, see, e.g., id. 1395w-22 ("Benefits and beneficiary protections"); id. 1395w-22(f) ("Grievance mechanism"); id. 1395w-22(g) ("Coverage determinations, reconsiderations, and appeals"). In this context, it strains credulity to suppose that, absent this cryptic parenthetical, the Secretary would overlook the need for regulation in these vital areas. Withal, the rule against superfluity can be a double- edged interpretive sword. Were the parenthetical in subparagraph (A) otherwise inexplicable, we would be faced with an unhappy choice between nullifying the parenthetical or reducing subparagraph (B) to mere window-dressing. Ordinary prudence, then, counsels in favor of searching the full paragraph's text and the surrounding statutory framework to see whether they collectively suggest a more substantive role for subparagraph (B), consistent with the odd parenthetical that appears in subparagraph (A). To this end, we mull three theories that the Association hawks. The district court embraced the first of the Association's theories: that the parenthetical simply authorizes the Secretary to promulgate, among other standards, regulations pertaining to the subject areas specifically preempted by subparagraph (B). On this reasoning, subparagraph (A) describes the manner in which state standards are preempted by federal regulations, whereas subparagraph (B) declares that certain state standards are specifically superseded by the BBA itself. This hypothesis fails because it depends on the faulty assumption that the Secretary is blind to the rest of the statute. After all, the parenthetical is not the source of the Secretary's rulemaking authority in these areas; section 1395w-26(b)(1) fills that role. What is more, subparagraph (B) would represent a curious placement for a provision describing the preemptive effect of the BBA itself. The subparagraph provides that certain state standards are superseded "under this paragraph" not "under this part" and the relevant paragraph appears in a subsection that orders the Secretary to establish standards by regulation. A far more logical location for an announcement of the BBA's preemptive effect would be section 1395w-22, which outlines the statutory benefit requirements for Medicare+Choice plans. For these reasons, we reject the Association's first theorem. The Association's remaining two theories are: (1) that the parenthetical informs the Secretary that she has interpretative authority to determine whether a particular state standard falls into one of the categories enumerated in subparagraph (B); and (2) that it puts the Secretary on notice that certain types of state laws are deemed per se to clash with her regulations (should she promulgate any). At first blush, both of these attributions may seem extraneous. Subparagraph (B) is obviously within the "part" which the Secretary is instructed to implement via regulation, see 42 U.S.C. 1395w-26, and one might think it equally obvious that the Secretary's power extends to subparagraph (B) itself. But that glib conclusion overlooks that the presumption against preemption applies to the task of defining the scope of an express preemption clause. See Medtronic, 518 U.S. at 485. Hence, the general delegation provision in paragraph (1) may not by itself resolve the potential deadlock between the presumption and the need for deference to agency expertise. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984); see generally Jack W. Campbell IV, Regulatory Preemption in the Garcia/Chevron Era, 59 U. Pitt. L. Rev. 805 (1998). This brings us to Smiley v. Citibank (S.D.), N.A., 517 U.S. 735, 743-44 (1996), in which the Court unanimously held that deference to a regulation that defines an ambiguous term in a substantive statutory provision is appropriate, even though the effect is to preempt state law. The Smiley Court distinguished Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992), on the ground that the issue there involved the meaning of an express preemption clause. See Smiley, 517 U.S. at 744. Thus, Smiley left open the question of what happens when the strong centrifugal force of deference to an agency's interpretation of an express preemption clause comes into contact with the strong centripetal force of the presumption against preemption. The intervening decision in Medtronic only complicates matters. There, five Justices accorded what appears to be an intermediate level of deference to an agency's interpretation of the scope of an express preemption provision. See Medtronic, 518 U.S. at 496 (according the agency's interpretation "substantial weight"); id. at 505-06 (Breyer, J., concurring) (allowing the agency a "degree of leeway"). Against the backdrop of this doctrinal uncertainty, the parenthetical here may well indicate that Congress intended the Secretary's regulations, including those designed to delineate the reach of subparagraph (B), to warrant at least some measure of deference, the non-preemption presumption notwithstanding. Although this distinction seems plausible, we need not rest our decision on it. The Association says that the most logical purpose of the parenthetical is to put the Secretary on notice that state standards in particular areas create a per se conflict with federal regulation. On its own, this proposed function merely restates the argument's conclusion. If subparagraph (B) clearly provides for the automatic preemption of state law in the three listed categories, then it affords ample notice to the Secretary without recourse to (or need for) the parenthetical in subparagraph (A). Despite this deficiency, however, the appellee's argument contains a solid kernel of truth. The important idea is not notice but, rather, the implied suggestion of a special category of inconsistency. Recognizing this fact brings the most natural reading of subparagraph (B) and the earlier parenthetical into focus, and supplies the last piece of the interpretive puzzle. We believe that paragraph (3) as a whole concerns the relationship between federal regulations and state criteria. This follows from the placement of the paragraph in a section that deals with the establishment of standards by the Secretary, not in the section containing the relevant self-executing provisions. As part of this construct, subparagraph (A) provides a general rule of conflict preemption that (as the parenthetical and title ["In general"] make clear) applies universally that is, all state standards are preempted to the extent they are inconsistent with federal regulations. Subparagraph (B) goes a step further. It says in unqualified terms that state standards relating to three enumerated areas "are superseded under this paragraph." In context, we think this means that state standards concerning these three enumerated areas are deemed to be per se inconsistent with any federal regulation. This taxonomy makes sense when one considers the centrality of the enumerated areas vis- |