Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_10-cv-00008/USCOURTS-azd-4_10-cv-00008-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1331 Federal Question: Bivens Act

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28 1 The facts are substantively identical to the parties’ Stipulated Statement of Facts (Doc.

22), however, the paragraphs were condensed and the exhibit references were altered to

reflect their location on the Court’s docket.

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Guillermina Parra, Terri Corrales,

Francisco Parra and Jesus Parra, 

Plaintiffs, 

vs.

PacifiCare of Arizona, Inc., 

Defendant. 

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No. CV-10-008-TUC-DCB-DTF

REPORT AND RECOMMENDATION

Pending before the Court are the parties’ cross-motions for summary judgment based

on a stipulated statement of facts (Doc. 22), which are fully briefed (Docs. 27-33). Pursuant

to the Rules of Practice in this Court, the matter was assigned to Magistrate Judge Ferraro

for a report and recommendation. The Magistrate recommends the District Court, after its

independent review of the record, enter an order dismissing this action for lack of subject

matter jurisdiction.

FACTS1

1. Manuel Marcos Parra (DOB March 16, 1930) married Guillermina Reyes Parra on

June 18, 1951. Manuel and Guillermina Parra had three children: named Plaintiffs

Terry Corrales, Francisco (Frank) Parra and Jesus Parra. Frank Parra died on

February 10, 2010. Manuel Parra retired from the Sunnyside Unified School

District #12 on March 17, 1992. Manuel Parra started to receive Social Security

retirement benefits in April 1992. Subsequent to that date Manuel Parra became

eligible for Medicare benefits as a Social Security retirement recipient. 

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2. PacifiCare of Arizona, Inc. (PacifiCare) is licensed under A.R.S. §§ 20-1051 et

seq., as a Health Care Service Organization, and is a federally qualified Health

Maintenance Organization (HMO). PacifiCare is a Medicare Advantage HMO

pursuant to its contract with the Centers for Medicare and Medicaid Services

(CMS), the governmental agency that administers the Medicare program and offers

a Medicare Advantage Plan to enrollees. PacifiCare’s contract with CMS and

amendments thereto is Exhibit A to Document 22. By enrolling in a Medicare

Advantage plan, Medicare-eligible individuals may substitute their receipt of direct

Medicare benefits for having their Medicare covered services provided through a

Medicare Advantage HMO and its network of contracted health care providers. 

As a Medicare Advantage HMO, PacifiCare is regulated under the federal

Medicare statute, 42 U.S.C. § 1395, et seq., and regulations promulgated

thereunder, 42 C.F.R., ch. IV. At all relevant times, Manuel Parra was enrolled in

and was a “covered person” under a Medicare Advantage plan (the Medicare Plan)

offered and underwritten by PacifiCare, known as “Secure Horizons.” 

3. The Medicare Plan is classified as Medicare Advantage Health Maintenance

Organization plan under 42 U.S.C. §§ 1395w-21 through 1395w-28 and 42 U.S.C.

§ 1395mm. Medicare Plan’s Evidence of Coverage is Exhibit B to Document 22.

The Medicare Plan’s Evidence of Coverage contains the following written

provisions: 

Third Party Liability and Subrogation 

In the case of injuries caused by any act or omission of a third party, and

any complications incident thereto, we shall furnish all Covered Services.

However, you agree to fully reimburse us or our designee for the cost of all

such services and benefits provided, immediately upon obtaining a

monetary recovery, whether due to settlement or judgment, as a result of

such injuries. 

You agree to cooperate in protecting the interests of UnitedHealthcare or its

designee under this provision. You shall not settle any claim, or release any

person from liability, without the written consent of UnitedHealthcare,

wherein such release or settlement will extinguish or act as a bar to our right

of reimbursement. 

Subrogation is the substitution of one person or entity in the place of

another with reference to a lawful claim, demand or right. Immediately

upon paying or providing any benefit, we shall be subrogated to and shall

succeed to all rights of recovery, under any legal theory of any type, for the

reasonable value of services and benefits provided by us to you from:

(a) third parties, including any person (or any insurer of any person) alleged

to have negligently or intentionally, or by reason of product liability or

breach of warranty, caused you to suffer Sickness or Injury; (b) your

employer; or (c) any other person or entity legally liable for damages or

harm to you, including but not limited to damages under any medical

payment, uninsured or underinsured motorist coverage benefits payable by

your own automobile insurer, or any damages payable by any homeowner

insurance carrier or any other insurer’s medical payment provision. These

third parties, persons and entities are collectively referred to as “Third

Parties” herein, and claims against them are “Third Party Claims.” You

agree to assign us all rights of recovery against such Third Parties; to the

extent of the reasonable value of services and benefits we provide to you,

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plus reasonable costs of collection. We or any of our subsidiaries or owned

affiliates are not a Third Party under this Plan. 

The following is agreed upon between you and us: 

• You will cooperate with us in protecting our legal rights to

subrogation and reimbursement; and you acknowledge that our rights under

this Section will be considered as the first priority claim against any Third

Parties, to be paid before any of your other claims are paid. Specifically, but

without limitation, you agree to: (i) provide any relevant information we

may request; (ii) sign and deliver such documents as we or our agents may

reasonably request to secure the subrogation claim; (iii) respond to requests

for information about any accidents or injuries; (iv) make court

appearances; and (v) obtain the consent of the Plan or our agents before

releasing any party from liability for or payment of medical expenses. We

are not obligated to pursue subrogation or reimbursement either for our own

benefit or on your behalf. 

• You will do nothing to prejudice our rights under this provision,

either before or after the need for services or benefits under this EOC. We

may, at our option, take necessary and appropriate action to preserve our

rights under these subrogation provisions, including filing suit on our own

behalf as your subrogee. Your failure to cooperate in this manner shall be

deemed a breach of this contract and may result in the institution of legal

action against you. 

• We will not use the rights enumerated throughout this Section to

affect or impair any parental financial obligations, such as child support,

associated with Pregnancy. 

• No court costs or attorneys fees may be deducted from our recovery

without our express written consent; and no so-called “Fund Doctrine” or

“Common Fund Doctrine” or “Attorney’s Fund Doctrine” shall defeat this

right. We are not required to participate in or pay court costs or attorneys

fees to any attorney or other representative or agent hired by you to pursue a

claim relating to your Sickness or Injury. 

• We may collect, at our opinion, amounts from proceeds of any Third

Party settlement (whether before or after any determination of liability) or

judgment that may be recovered by your or your legal representative,

regardless of whether or you have been made whole. You will hold any

proceeds of such a Third Party settlement or judgment in a constructive

trust for our benefit under these subrogation provisions. We will be entitled

to recover from you reasonable attorney fees incurred in collecting proceeds

held by you. 

Reimbursement of Third Party Medical Expenses 

If you receive medical services under your Plan coverage after being

injured through the actions of another person (a third party) for which you

receive a monetary recovery, you will be required to reimburse us, or our

designee, to the extent permitted under State and federal law, for the cost of

such medical services and benefits provided and the reasonable costs

actually paid to perfect any lien. 

You must obtain the written consent of UnitedHealthcare or its nominee

(entity or person authorized to give consent) prior to settling any claim, or

releasing any third party from liability, if such settlement or release would

limit the reimbursement rights of UnitedHealthcare or its nominee. 

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You are required to cooperate in protecting the interests of

UnitedHealthcare or its nominee by providing all liens, assignments or

other documents necessary to secure reimbursement to us or our nominee.

Failure to cooperate with us or our nominee in this regard could result in

termination of your Plan membership. 

Should you settle your claim against a third party and compromise the

reimbursement rights of UnitedHealthcare or its nominee without our

written consent, or otherwise fail to cooperate in protecting the

reimbursement rights of UnitedHealthcare or its nominee, we may initiate

legal action against you. Attorney fees will be awarded to the prevailing

party. 

4. On February 21, 2009, Manuel Parra was walking in the parking lot of the La

Estrella bakery on South 12th Avenue in Tucson, Arizona. A vehicle driven by

John Thurston struck Manuel Parra causing what would be fatal injuries.

Paramedics transported Manuel Parra to University Medical Center (“UMC”). He

remained in the ICU Unit at UMC until his death on March 2, 2008. Pacific Care

paid UMC and other medical providers, pursuant to the Medicare Plan and its

contract with the providers, for the medical care and treatment Manuel Parra

received as a result of the February 21, 2009, accident and John Thurston’s

negligence. The value of the medical benefits paid by the Medicare Plan in

treatment of the injuries sustained by Manuel Parra in the February 21, 2009,

accident is $136,630.90. 

5. John Thurston was insured by the Government Employees Insurance Company

(GEICO). In April 2009, Guillermina Parra, Terry Corrales, Francisco (Frank)

Parra and Jesus Parra (collectively “the Parras”), through their attorney, made a

demand for settlement with GEICO for wrongful death damages pursuant to

Arizona’s wrongful death statute. The Parras sought damages based on the loss of

their relationship with Manuel Parra. The Parras did not seek or receive

compensation for medical expenses for Mr. Parra’s final treatment at UMC. The

Parras did not establish an estate, designate or appoint a personal representative of

Manuel Parra, or pursue a claim under the survivorship statute against Mr.

Thurston or GEICO. 

6. In June 2009, GEICO agreed to tender its policy limits of $500,000 to the Parras to

settle their wrongful death claim. In July 2009 PacifiCare, through its agent,

informed the Parra’s attorney and GEICO that it claimed a right of recovery for all

medical expenses it paid for Manuel Parra’s medical care and treatment resulting

from the February 21, 2009, accident. On September 21, 2009, GEICO issued a

separate check made jointly payable to Goldberg & Osborn and Ingenix in the

amount of $136,630.90 to be held in trust pending resolution of the Medicare

Plan’s right of recovery. GEICO paid that amount as recognition of the Medicare

Plan’s assertion of a right of recovery and/or lien rights and to protect the interests

of GEICO and its insured.

7. The Settlement Agreement and Release of All Claims (Settlement Agreement)

entered between the Parras, GEICO, and John and Linda Thurston is Exhibit C to

Document 22. The Parras each signed the Settlement Agreement. The Settlement

Agreement contains the following written provisions: 

In consideration of the payments called for herein, Releasors hereby

completely RELEASE, ACQUIT AND FOREVER DISCHARGE

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Releasees of and from any and all past, present or future claims, demands,

obligations, actions, causes of action, wrongful death claims, survival

claims, rights, damages, costs, losses of consortium, loss of services,

expenses and compensation of any nature whatsoever, whether based on

tort, contract or other theory of recovery, and whether for compensatory or

punitive damages, which Releasors now have, or which may hereafter

accrue or otherwise be acquired on account of, or in any way growing out

of, and which are the subject of the Claim, including, without limitation,

any and all known or unknown claims which now exist or may hereafter

arise in favor of Releasors, if any, in connection with 

the alleged damages to Releasors, as wrongful death beneficiaries, pursuant

to A.R.S. § 12-611 et. seq. or a Personal Representative pursuant to A.R.S.

§ 14-3110. This Settlement Agreement shall be fully biding and a complete

settlement between Releasors and Releasees.

. . . .

It is further understood that Releasors agree to DEFEND,

REIMBURSE, HOLD HARMLESS, AND INDEMNIFY Releasees from

any liability arising from (1) any subrogation claim to which Releasors’

recovery may be subject, including but not limited to any claim by Ingenix

or Secure Horizons; (2) liens for any compensation paid under any statute

or regulation, state or federal, including but not limited to any claim made

by Medicare for the benefit of Manuel Parra; (3) medical payments due or

claims to be due; (4) any attorney lien asserted by any prior legal

representative; (5) any contract pertaining to the proceeds from the

settlement referred to in this Settlement Agreement; and/or (6) all claims,

liens, subrogation claims, obligations, actions, causes of action, damages,

attorney’s fees, costs and expense of every kind that may ever by sought by

anyone for any reason in any way related to the enforcement of any such

claims, liens, actions, damages, fees, costs, or expenses.

. . . .

Releasors agree to DEFEND, HOLD HARMLESS, AND INDEMNIFY

Releasees from and against all such claims, liens, subrogation claims or

liens, obligations, actions, causes of action, and damages, arising in favor of

any health care provider who has provided medical and health care of any

kind to Releasors. Releasors agree to fully pay and satisfy any and all such

un[paid bills, liens, and claims and to obtain a complete release of all such

bills, liens, and claims upon the request of counsel for Releasees and deliver

the same to counsel. Releasors further agree to fully DEFEND,

REIMBURSE, HOLD HARMLESS AND INDEMNIFY Releasees from all

losses, damages, expenses, and costs, including but not limited to court

costs, investigation expenses, and attorney’s fees, which Releasees may

incur in connection with any such bills, liens, or claims mentioned above

regardless of cause, any fault, or negligent or grossly negligent acts or

omissions of Releasees. 

8. The Parties have been unable to resolve the dispute regarding the Medicare Plan’s

right of recovery, resulting in this Declaratory Judgment Action. 

9. CMS (Center for Medicare and Medicaid Services, the federal agency that

administers Medicare) in its Secondary Payer Manual (the Manual) defines

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 2 Plaintiff submitted the facts of paragraph 9 in a supplemental statement of facts.

(Doc. 27-1.) Defendant objected to the extent Plaintiff did not include the entirety of the first

paragraph of section 50.5.4.1.1 of the Manual. The Court includes the entirety of that

paragraph in this factual statement.

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“liability insurance” as: it [liability insurance] includes payments under state

“wrongful death” statutes that provide payment for medical damages. Chapter 7,

Section 50.5.4.1.1 of the Manual states:

Wrongful death statutes are State laws that permit a person’s survivors to

assert the claims and rights that the decedent had at the time of death. 

These laws may include recovering for the deceased’s medical expenses. 

When a liability insurance payment is made pursuant to a wrongful death

action, Medicare may recover from the payment only if the State statute

permits recovery of these medical expenses. Generally, if the statute

permits recovery of the deceased’s medical expenses, Medicare may pursue

its payments, even if the action fails to explicitly request damages to cover

medical expenses. Thus, in that event, even if the entire cause of action sets

forth only the relatives and/or heirs damages and losses, then Medicare may

still recover its payments.

. . . .

NOTE: If a wrongful death statute does not permit recovering medical

damages, Medicare has no claim to the wrongful death payments.2

DISCUSSION

The central issue raised by the parties is whether Defendant has a federal right of

action against Plaintiffs under the Medicare statutes. The parties do not frame the issue as

one of jurisdiction. However, if Defendant does not have a federal right of action, which is

the basis for jurisdiction in this Court, it must be dismissed. See, e.g. Care Choices HMO

v. Engstrom, 330 F.3d 786, 791 (6th Cir. 2003) (affirming dismissal for lack of subject matter

jurisdiction because Medicare provision did not create a private right of action). “If the court

determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the

action.” Fed. R. Civ. P. 12(h)(3); see Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir.

2002) (citing Rule 12(h) for proposition that court may sua sponte address subject matter

jurisdiction at any time during a case). Defendant points out that Plaintiffs believe there is

jurisdiction as evidenced by their filing in this Court (Doc. 30 at 7), however, that is

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 3 Plaintiffs’ Complaint is framed as if Defendant has a federal private right of action

(Doc. 1), however, they argue to the contrary in the cross-motions for summary judgment.

Plaintiffs are residents of Arizona and Defendant is incorporated in Arizona, therefore,

diversity jurisdiction is not implicated. See 28 U.S.C. § 1332(a), (c)(1). 

 4 Pacificare does not contend the Medicare statute completely preempts state law,

pursuant to which a claim based on the preempted state law would be considered a federal

claim. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). Complete preemption is very

rare, and the Supreme Court has only clearly identified three federal acts that completely

preempt state law and provide jurisdiction: section 301 of the Labor Management Relations

Act, section 502 of the Employee Retirement Income Security Act; and sections 85 and 86

of the National Bank Act. Beneficial Nat. Bank v. Anderson, 539 U.S. 1, 6-7, 11 (2003); see

Hofler v. Aetna US Healthcare of California, 296 F.3d 764, 770 (9th Cir. 2002) (finding no

evidence that Medicare or MA plan statutes completely preempt state law causes of action),

abrogated on other grounds by Martin v. Franklin Capital Corp., 546 U.S. 132 (2005).

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irrelevant because jurisdiction cannot be created by stipulation.3

 See Holman v. Laulo-Rowe

Agency, 994 F.2d 666, 668 n.1 (9th Cir. 1993) (citing Neirbo Co. v. Bethlehem Shipbuilding

Corp., 308 U.S. 165 (1939)).

Because the Court is obligated to assess its subject matter jurisdiction in light of the

dispute over whether Defendant has a private right of action under federal law, it makes that

determination first. “[D]istrict courts shall have original jurisdiction of all civil actions

arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. A

case generally “arises under the law that creates the cause of action.” Merrell Dow

Pharmaceuticals Inc. v. Thompson, 478 U.S. 804, 808 (1986). In a declaratory judgment

action, a federal court has jurisdiction if the defendant could have brought an action to

enforce his rights in federal court. See Transamerica Occidental Life Ins. Co. v. Digregorio,

811 F.2d 1249, 1253 (9th Cir. 1987); Janakes v. United States Postal Serv., 768 F.2d 1091,

1093-94 (9th Cir. 1985) (finding jurisdiction not based on the declaratory judgment act but

because the defendant could have brought a coercive action in federal court to enforce its

rights). The parties contend that jurisdiction is premised on a federal statute; specifically,

Defendant contends the claims arise under the Medicare statute and the Medicare Secondary

Payer (MSP) Act.4

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Statutory Scheme

Title VXIII of the Social Security Act establishes Medicare, a federally funded health

insurance program for the elderly and disabled. 42 U.S.C. §§ 1395 et seq. Under Medicare

Part C, there are health plan options that allow individuals qualified for Medicare to enroll

with a private insurance company, Medicare Advantage (MA) plans. 42 U.S.C. §§ 1395w-21

to 1395w-29. Any MA Plan must enter into a contract with the Secretary of Health and

Human Services, 42 U.S.C. § 1395w-27, and the plan agrees to provide the same benefits an

individual is eligible to receive under Medicare, 42 U.S.C. § 1395w-22(1)(A).

Under the MSP, Medicare is designated as a secondary payer when an individual has

overlapping insurance coverage (including workmen’s compensation, automobile or liability

insurance, or no fault insurance). 42 U.S.C. § 1395y(b)(2). If payment from a primary plan

may be delayed, the Secretary of Health and Human Services (Secretary) may make payment

for services, conditioned upon reimbursement by the primary plan. Id. at §1395y(b)(2)(B).

The statute provides that the United States may bring an action against an entity responsible

for payment for a service under a primary plan, for which the Secretary paid, and may

recover from any entity that received payment from the primary plan. Id. at

§ 1395y(b)(2)(B)(iii). The statute explicitly creates a private right of action for damages if

a primary plan fails to provide payment or reimbursement. Id. at § 1395y(b)(2)(B)(iii),

(b)(3)(A).

Under circumstances in which Medicare would be a secondary payer, pursuant to 42

U.S.C. § 1395y(b)(2), an MA plan may:

charge or authorize the provider of such services to charge, in accordance with

the charges allowed under a law, plan, or policy described in such section – 

(A) the insurance carrier, employer, or other entity which under such law,

plan, or policy is to pay for the provision of such services, or

(B) such individual to the extent that the individual has been paid under

such law, plan, or policy for such services.

42 U.S.C. § 1395w-22(a)(4). A similar statutory provision provides:

(4) Notwithstanding any other provision of law, the eligible organization

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may (in the case of the provision of services to a member enrolled under this

section for an illness or injury for which the member is entitled to benefits

under a workmen’s compensation law or plan of the United States or a State,

under an automobile or liability insurance policy or plan, including a selfinsured plan, or under no fault insurance) charge or authorize the provider of

such services to charge, in accordance with the charges allowed under such

law or policy –

(A) the insurance carrier, employer, or other entity which under

such law, plan, or policy is to pay for the provision of services, or

(B) such member to the extent that the member has been paid under

such law, plan, or policy for such services.

42 U.S.C. § 1395mm(e).

Analysis

Pacificare contends Congress created an implied private right of action for MA plans.

If a federal statute does not create an explicit private right of action, suit may only be brought

if “Congress intended to provide the plaintiff with a[n implied] private right of action.”

Digimarc Corp. Derivative Litigation v. Davis, 549 F.3d 1223, 1230 (9th Cir. 2008). “[T]he

fact that a federal statute has been violated and some person has been harmed does not

automatically give rise to a private cause of action in favor of that person.” Touche Ross &

Co. v. Redington, 442 U.S. 560, 568 (1979). Congress must have intended to create a private

right and a private remedy for a federal cause of action to exist. Alexander v. Sandoval, 532

U.S. 275, 286 (2001) (citing Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11,

15 (1979)).

The Supreme Court created a four-part test to assess whether there is an implied

private right of action: whether the plaintiff is a member of the class for whom the statute

was enacted to benefit; whether there is legislative intent to create or deny a remedy; whether

it is consistent with the legislative scheme to imply a remedy; and whether the cause of

action is one traditionally within state law. Cort v. Ash, 422 U.S. 66, 78 (1975). With

respect to factor one, there is no question that MA plans are intended beneficiaries of the

statutory provisions at issue. See Engstrom, 330 F.3d at 789. Since Cort, the courts have

recognized that legislative intent is the “ultimate question” and “unless this congressional

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intent can be inferred from the language of the statute, the statutory structure, or some other

source, the essential predicate for implication of a private remedy simply does not exist.”

Thompson v. Thompson, 484 U.S. 174, 179 (1988) (looking to the Cort factors only as a

guide to discerning Congress’ intent) (quoting Northwest Airlines, Inc. v. Transport Workers,

451 U.S. 77, 94 (1981)); Touche Ross & Co., 442 U.S. at 575-76 (noting that the first three

Cort factors focus on legislative intent, which is the determinative issue); Digimarc Corp.

Derivative Litigation, 549 F.3d at 1231 (focusing on the second Cort factor); Townsend v.

University of Alaska, 543 F.3d 478, 486-87 (2008) (finding congressional intent generally

dispositive).

The Court now turns to the central question of congressional intent. The one circuit

court that has considered the specific question before this Court concluded that MA plans do

not have an implied right of action under § 1395mm. Engstrom, 330 F.3d 786. Defendant

does not rely on any substantive legislative history to support its argument and the court in

Engstrom concluded the history provided no guidance for the analysis. Id. at 789.

Reviewing the legislative scheme of the statute convinced that court there was no private

right of action:

The entirety of § 1395mm is aimed at creating preconditions for and regulating

the behavior or HMOs that substitute for Medicare. The lengthy statute lists

the eligibility requirements for participating organizations and heavily

regulates how much they get paid by Medicare, their duties to beneficiaries,

the type of services they may provide, the composition of their membership

pool, and the composition of their insurance contracts. See 42 U.S.C.

§ 1395mm(a)-(i). The subdivision within which the alleged implied private

right of action is located, § 1395mm(e) regulates the premiums Medicaresubstitute HMOs may charge to beneficiaries. Placing § 1395mm(e)(4) in this

context makes it clear that it is intended to explain what Medicare-substitute

HMOs are still permitted to do – namely, include a provision in their own

policies making them a secondary insurer – and is not intended to create an

affirmative right to collect from other sources of insurance via an action in

federal court. If an HMO chooses to include such a provision in its insurance

policy, its remedy would be based on a standard insurance contract claim and

not on any federal statutory right. Our conclusion is bolstered by the fact that

Care Choices HMO has this widely recognized alternative avenue for

enforcement.

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Id. at 790. Subsequent to the Engstrom decision, one district court considered 42 U.S.C.

§§ 1395mm(e)(4) and 1395w-22(a)(4) and concluded that the statutory language was

“permissive” and could not be:

construed, explicitly or implicitly, as creating a mechanism for enforcing the

contractual right to reimbursement if the insurer does include a subrogation

provision. Once bargained for, the contractual right of reimbursement is not

transformed into a federal right enforceable under the Medicare Act merely

because the contract relates to an insurer’s Medicare plan. The right to

subrogation remains a contract dispute between a private insurer and its

insured.

Nott v. Aetna U.S. Healthcare, Inc., 305 F. Supp.2d 565, 572 (E.D. Penn. 2004).

The Court in Engstrom also pointed out that the language of the Medicare

reimbursement provision is mandatory (“shall be conditioned on reimbursement,” and “shall

reimburse”) while the MA plan language is permissive (“may charge”), suggesting lack of

Congressional intent to create a remedy for the MA plans, compare 42 U.S.C.

§ 1395y(b)(2)(B) with 42 U.S.C. § 1395mm(e)(4). 330 F.3d at 791. Further, when Congress

grants an express private right of action in certain provisions of legislation, that undermines

implying a private right of action under other provisions. Touche Ross & Co., 442 U.S. at

571-72; Opera Plaza Residential Parcel Homeowners Assoc. v. Hoang, 376 F.3d 831, 836

(9th Cir. 2004) (“analogous provisions expressly providing for private causes of action can

imply congressional intent not to create an implied cause of action.”). The Court in

Engstrom found reliance on this language from Touche misplaced because that MA plan was

not asking the court to imply a remedy based on the MSP express remedy for Medicare.

Here, Pacificare appears to be arguing, in part, that it has an implied right based on

Medicare’s express right. According to Touche, the express right created for Medicare

weighs against finding an implied right for Pacificare.

Defendant argues that § 1395w-22(a)(4)’s reference to § 1395y(b)(2) incorporated

the provisions of § 1395y(b) that provide Medicare with a private cause of action, thereby

extending that right to MA plans. The Court disagrees. First, while § 1395w-22 references

the entities that qualify as a primary plan to which Medicare is a secondary payer in

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§ 1395y(b)(2)(A), the United States’s right to bring an action is set forth in other subparts,

(b)(2)(B)(iii) and (B)(3)(A). Thus, this statutory language in no way evidences an intent to

incorporate and extend Medicare’s right of private action to MA plans. Second, § 1395w-22

is titled “Benefits and beneficiary protections” and sets forth the services MA plans are

required and allowed to provide, as well as creating disclosure and coverage determination

requirements. The secondary payer provision is within the subsection detailing the benefits

the MA plan must provide to members. Subsection (a)(4)’s purpose is to notify the MA

plans that they may charge another responsible entity for services the MA plan is otherwise

obligated to provide under the subsection. Just as the Court in Engstrom concluded when

analyzing § 1395mm, this provision is not intended to create a private right of action to

recover the cost of such services. Rather, the statute allowed Pacificare to include

subrogation rights in its agreement with its members, but it did not create a federal right to

enforce that contract.

Next, Defendant argues that Engstrom is no longer persuasive because new

regulations have been issued since that decision. The primary regulation upon which

Pacificare relies provides, “The MA organization will exercise the same rights to recover

from a primary plan, entity, or individual that the Secretary exercises under the MSP

regulations in subparts B through D of part 411 of this chapter.” 42 C.F.R. § 422.108(f).

Defendants’ reliance is misplaced. “Language in a regulation may invoke a private right of

action that Congress through statutory text created, but it may not create a right that Congress

has not.” Alexander, 532 U.S. at 291 (citing Touche Ross & Co., 442 U.S. at 577 n.18).

Defendant cites the Rouse case (which relies on Alexander), however, it misstates the legal

proposition from those cases when it summarizes it as: “explaining that a regulation may

create a private right of action if consistent with Congressional intent.” (Doc. 33 at 5, citing

Rouse v. United States Dep’t of State, 567 F.3d 408, 418 (9th Cir. 2009).) Rouse actually

holds that a plaintiff has to “demonstrate that a federal statute vests him with” a private right

of action. 567 F.3d at 418. Additionally, Defendant relies upon the Secretary’s

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interpretation of congressional intent, however, a Secretary’s opinion on “the scope of the

judicial power vested by a statute” is not entitled to deference. Adams Fruit Co., Inc. v.

Barrett, 494 U.S. 638, 650 (1990). No regulations or agency interpretations alter the Court’s

analysis – based on congressional intent as reflected in the relevant statutes – that Defendant

does not have a private right of action.

To the extent Pacificare is relying upon the preemption provisions of the statute as a

basis for jurisdiction, this assertion fails. Preemption establishes jurisdiction only in the

narrow instance of complete preemption, such that state law claims are converted to federalquestion claims. See Holman, 994 F.2d at 668-69. Defendant does not contend that

complete preemption is at issue; to the contrary, Defendant contends it has a viable state-law

contract claim. Defendant’s arguments, that specific Arizona laws are preempted by a

federal law or regulation (such as the anti-subrogation law and wrongful death statute), may

be litigated in state court. See, e.g. Hernandez-Gomez v. Leonardo, 185 Ariz. 509, 917 P.2d

238 (1996); Hutto v. Francisco, 210 Ariz. 88, 90, 107 P.3d 934, 936 (App. 2005); Dillon v.

Zeneca Corp., 202 Ariz. 167, 170, 42 P.3d 598, 601 (App. 2002); Kadera v. Superior Ct.

Cnty. of Maricopa, 187 Ariz. 557, 560, 931 P.2d 1067, 1070 (App. 1996). However, “[i]f

Congress intends a preemption instruction completely to displace ordinarily applicable state

law, and to confer federal jurisdiction thereby, it may be expected to make that atypical

intention clear.” McVeigh, 547 U.S. at 698. Thus, preemption alone does not provide

jurisdiction for this action.

As mentioned above, Pacificare contends that even if there is no private right of action

based on the Medicare statute, it has the right to bring a state-law contract claim (“to enforce

its federally-granted right to obtain third party recoveries”). (Doc. 33 at 6.) Neither the

Court nor Plaintiffs disagree that Defendant may pursue a state contract claim. However,

Defendant cannot create a federal right of action or subject matter jurisdiction in this Court

by stating its contract claim as being based on a federal right. In other words, “a complaint

alleging a violation of a federal statute as an element of a state cause of action, when

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Congress has determined that there should be no private, federal cause of action for the

violation, does not state a claim ‘arising under the Constitution, laws, or treaties of the United

States.’ 28 U.S.C. § 1331.” Thompson, 478 U.S. at 817; cf. Grable & Sons Metal Products,

Inc. v. Darue, 545 U.S. 308, 314 (2005) (jurisdiction may exist if “a state-law claim

necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal

forum may entertain without disturbing any congressionally approved balance of federal and

state judicial responsibilities.”). 

Based on review of the first three Cort factors, the Court finds that Congress did not

intend a private right of action for MA plans. That is dispositive of the question before the

Court. Thompson, 484 U.S. at 179. However, the Court assesses the fourth Cort factor

because Defendant contends it weighs in its favor that enforcement of “Medicare rights” is

not traditionally relegated to state law. (Doc. 30 at 6.) However, contract-based claims are

traditionally questions of state law. See Empire Healthchoice Assur., Inc. v. McVeigh, 547

U.S. 677, 698, 700 (2006) (finding no jurisdiction over health insurance company’s claim

to reimbursement from a tort recovery by estate of a federal employee covered by a Federal

Employees Health Benefits Act insurance plan). Cort’s fourth factor does not alter the

Court’s analysis. Finally, because the Court does not have original jurisdiction over this

action, it cannot exercise supplemental jurisdiction over any state law claims. See 28 U.S.C.

§ 1367(a) (granting supplemental jurisdiction over related claims within an action over which

the Court has original jurisdiction).

RECOMMENDATION

Based on the foregoing, the Magistrate Judge recommends that the District Court

dismiss this action for lack of subject matter jurisdiction.

Pursuant to Federal Rule of Civil Procedure 72(b)(2), any party may serve and file

written objections within fourteen days of being served with a copy of the Report and

Recommendation. If objections are not timely filed, they may be deemed waived. If

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objections are filed, the parties should use the following case number: CV 10-008-TUCDCB.

DATED this 4th day of February, 2011.

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