U.S. District Court for the Northern District of Illinois Dismisses State Law Claims Against Insurer Based on Medicare Preemption and Federal Official Immunity

Posted: 10/28/2014 | Share This Post

In an important decision for the defense of both health insurance carriers acting as Medicare Advantage organizations and providers in the Seventh Circuit, the U.S. District Court for the Northern District of Illinois recently issued an opinion applying Medicare preemption and federal official immunity to bar state law tort and statutory claims against a major health insurer and hospital. 

In Rudek v. Presence Our Lady of the Resurrection Medical Center, et al., No. 13 C 06022, Plaintiff claimed that the health insurer and the hospital defendant failed to properly deliver a notice of Medicare non-coverage to her father who had suffered a stroke, resulting in a 23-day lapse in her father’s Medicare Advantage (Part C) coverage and missed opportunities for rehabilitation.  Plaintiff brought state law tort and ICFA claims based on the alleged improper delivery and sought hundreds of thousands in compensatory damages and also punitive damages.

Kirstin Ives and Megan Zmick of Williams Montgomery & John Ltd. represented the health insurer defendant and argued that the federal Medicare Act expressly preempts all of Plaintiff’s state-law theories of relief.   They also argued that the insurer was carrying out the administration of the Medicare Part C program and that, as such, it was entitled to official immunity for its discretionary acts in doing so. 

Judge Tharp granted the health insurer and hospital defendants’ motions to dismiss on both preemption and official immunity grounds in a 16-page opinion.  As the court acknowledged in the opinion, the Seventh Circuit has not yet had occasion to analyze the breadth of Medicare preemption.  The court relied on the Ninth Circuit holding in Uhm v. Humana, Inc., 620 F.3d 1134 (9th Cir. 2010) and found that, because the Medicare statute and regulations expressly regulated the provision of the notice of Medicare non-coverage, the state law claims attempting to hold the insurer and hospital liable for the notice’s delivery were preempted.  As the court put it, “[d]efining a provider’s duties to enrollees under [the state law] standards creates a risk of inconsistent enforcement regimes among the various states and the imposition of duties that vary from those imposed by the Medicare Act itself . . . [i]t is that variation that a broad preemption provision aims to prevent.”

The court went on to hold that the state law claims were also barred based on federal official immunity.  The court found that the hospital worker’s actions in delivering the notice of Medicare non-coverage were within the parameters of the official duties of a provider under the Medicare regulations and, as such, the provider could not be sued under state laws for actions within the scope of those official duties.

This opinion is significant since it can serve as precedent that Medicare carriers and providers can utilize going forward in cases in the Seventh Circuit.