Medicare Advantage and Part D Preemption: What Happens When States Try to Regulate Medicare Plans?

Medicare Advantage and Part D Preemption: What Happens When States Try to Regulate Medicare Plans? (2023 Institute on Medicare and Medicaid Payment Issues Single Session)

Kristyn Bunce DeFilipp, Foley Hoag LLP, Boston, MA
Elizabeth R. Moellering, Associate General Counsel, OptumRx Inc, Minneapolis, MN

When Congress established the Medicare Part D program as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”), Congress expanded and adopted the existing express preemption provision for the Medicare Advantage (“MA”) program into the new Part D benefit. Prior to the MMA, Medicare’s express preemption provision required a conflict preemption standard for most state laws, but provided that an enumerated list of fields of state regulation were preempted regardless of whether a state law was inconsistent with the federal requirement. The MMA eliminated the conflict requirement, and created a single all-encompassing clause that makes clear that state laws regulating MA and Part D plans are presumed preempted unless they fall into specified exceptions for state licensing laws and laws regulating plan solvency.

In the past few years, there has been an increase in states attempting to apply state regulations to MA and Part D plans. These regulations affect critical aspects of the Part D benefit, including areas that are subject to extensive federal regulation, including the amount a plan reimburses a pharmacy for a prescription drug, cost-sharing amounts, the inclusion of pharmacies in a plan’s network, and the distribution of plan materials to beneficiaries. Federal district courts and courts of appeal have been inconsistent in how they apply the Medicare express preemption standard, and the Supreme Court has yet to directly address the issue.

Basic legal structure of the express preemption provision in MA and Part D, how the preemption standard evolved with the adoption of the MMA in 2003, and how courts have historically applied this statutory standard. Regulatory guidance from CMS on what the agency understands to be the scope of MA Part D preemption
Current issues in MA and Part D Preemption: Recent efforts by states to regulate MA and Part D plans with a focus on state regulations of PBMs. How courts have evaluated recent legal challenges asserting that state PBM regulations are preempted by MA and Part D, and the resulting landscape from inconsistent court decisions
New Trends and Looking Forward: Various trends in state laws that could implicate MA and Part D preemption, and whether we expect future clarity from courts on the scope of preemption

This is a 60 minute session taken from the 2023 Institute on Medicare and Medicaid Payment Issues program. This session is worth 1.2 CE credits for a 50-minute state and 1 credit for a 60-minute state. Please note that the actual number of credits may vary from state to state.