Federal Law Preempts Balance Billing Lien Statutes

Ansley v. Banner Health Network, No.  CV-19-0077-PR (March 9, 2020) J. Bolick https://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2020/CV190077PR.pdf

ARIZONA STATUTES AUTHORIZING THE RECORDING OF LIENS AGAINST THIRD PARTY TORTFEASORS FOR HOSPITALS TO RECOVER HEALTH CARE COSTS EXCEEDING THEIR MEDICAID REIMBURSEMENT (BALANCE BILLING) IS DISALLOWED BY FEDERAL PREEMPTION

Plaintiffs are patients treated at defendant hospitals under the Arizona Health Care Cost Containment System [AHCCCS]. The hospitals filed liens pursuant to A.R.S.  §§ 33-931(A) and 36-2903.01(G)(4) against third-party tortfeasors who caused the patients' injuries to recover the remainder of their customary fees beyond Medicaid reimbursement (balance billing).

The patients filed this class action alleging the liens are invalid in violation of federal Medicaid law, specifically 42  U.S.C.  §  1396a(a)(25)(C)  and  42  C.F.R.  § 447.15 and preempted under the Supremacy Clause, U.S. Const. Art. VI, cl. 2. The trial court enjoined the hospitals from asserting these liens on federal preemption grounds.

The Arizona Court of Appeals affirmed on different grounds. The Arizona Supreme Court affirmed and vacated the court of appeals decision.

The supreme court held that a private right of action exists for these plaintiffs to bring this action under 42 U.S.C. § 1396a(a)(25)(C) as an equitable remedy.

2  C.F.R.  § 447.15 expressly  provides  that  “[a]  State  plan  must  provide  that  the  Medicaid  agency  must  limit  participation  in  the  Medicaid  program  to  providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or co-payment required by the plan to be paid  by  the  individual.” The state statutes are designed to allow balance billing whereas the federal expressly prohibits this--classic “conflict preemption”—the “state law stands as an obstacle to the achievement of a federal statute's purpose, or when compliance with both federal and state laws is impossible.” Federal law preempts the balance billing lien statutes.

Finally, the trial court's grant of attorneys' fees to the plaintiffs under the private attorney general doctrine was upheld.  “Courts may award such fees in certain cases vindicating important constitutional or statutory rights.”