Global Rescue Jets, LLC v. Kaiser Foundation Health Plan ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GLOBAL RESCUE JETS, LLC, DBA No. 20-56410
Jet Rescue, a Delaware corporation,
Plaintiff-Appellant, D.C. No.
3:19-cv-01737-
v. L-NLS
KAISER FOUNDATION HEALTH PLAN,
INC., OPINION
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
M. James Lorenz, District Judge, Presiding
Argued and Submitted January 10, 2022
Pasadena, California
Filed April 8, 2022
Before: A. Wallace Tashima, Milan D. Smith, Jr., and
Paul J. Watford, Circuit Judges.
Opinion by Judge Watford
2 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
SUMMARY *
Medicare Act
The panel affirmed the district court’s dismissal for lack
of subject matter jurisdiction of an action brought by Global
Rescue Jets, LLC, which sought recovery of amounts it had
billed Kaiser Foundation Health Plan, Inc., for international
air ambulance services it provided to two patients who were
enrolled in Kaiser Medicare Advantage plans under
Medicare Part C.
Global Rescue Jets, which does business as Jet Rescue,
billed Kaiser at Jet Rescue’s usual and customary rates.
Kaiser paid only a fraction of the billed amount, however,
because in its view Jet Rescue’s services were covered by
Medicare and thus subject to payment at the much lower
Medicare-approved rates.
The panel affirmed the district court’s dismissal on the
ground that Jet Rescue, assignee of the two patients’ claims
for healthcare benefits, failed to exhaust its administrative
remedies under the Medicare Act. The panel held that the
administrative review scheme under the Medicare
Advantage program is modeled on the administrative review
scheme Congress established under original Medicare, and
it is well settled that, pursuant to 42 U.S.C. § 405, original
Medicare beneficiaries must exhaust their administrative
remedies before seeking judicial review of a claim for
benefits. The panel concluded that there was no basis for
creating a different rule with respect to administrative
*
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 3
exhaustion under the Medicare Advantage program.
Accordingly, the panel held that the administrative
exhaustion requirement imposed by Medicare Part C
includes a both non-waivable “presentment” requirement
and a waivable requirement that enrollees pursue a claim for
benefits through each available level of administrative
review.
The panel concluded that Jet Rescue met the first of these
requirements but not the second and therefore failed to
exhaust administrative remedies. The panel rejected Jet
Rescue’s arguments that 42 U.S.C. § 405(h) did not bar its
lawsuit against Kaiser because (1) a Medicare Advantage
organization is not an “officer or employee” of the United
States or the Secretary of Health and Human Services, and
(2) this lawsuit did not involve claims “arising under” the
Medicare Act.
The panel also rejected Jet Rescue’s contention that the
exhaustion requirement should be excused. The panel held
that the exhaustion requirement may be excused if three
conditions are satisfied: (1) the plaintiff’s claim is wholly
collateral to a claim for Medicare benefits; (2) the plaintiff
has made a colorable showing of irreparable harm; and
(3) exhaustion would be futile. The panel concluded that Jet
Rescue failed to meet the first and third requirements.
4 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
COUNSEL
George P. Barbatsuly (argued), K&L Gates LLP, Newark,
New Jersey; Caitlin C. Blanche, K&L Gates LLP, Irvine,
California; for Plaintiff-Appellant.
Moe Keshavarzi (argued), Sheppard Mullin Richter &
Hampton LLP, Los Angeles, California; Matthew G.
Halgren, Sheppard Mullin Richter & Hampton, San Diego,
California; for Defendant-Appellee.
OPINION
WATFORD, Circuit Judge:
Plaintiff Global Rescue Jets, which does business as Jet
Rescue, provided international air ambulance services to two
patients who became seriously ill while in Mexico. Both
patients were enrolled in Medicare Advantage plans offered
by defendant Kaiser Foundation Health Plan, Inc. Jet
Rescue flew the patients from a hospital in Mexico to a
hospital in San Diego and billed Kaiser for those services at
Jet Rescue’s usual and customary rates. Kaiser paid only a
fraction of the billed amount, however, because in its view
Jet Rescue’s services were covered by Medicare and thus
subject to payment at the much lower Medicare-approved
rates. Jet Rescue contends that its services were not covered
by Medicare and that, under the terms of Kaiser’s plans, it is
entitled to be paid in full.
Jet Rescue brought this action against Kaiser to recover
the additional sums Kaiser allegedly owes. The district court
dismissed the action for lack of subject matter jurisdiction
on the ground that Jet Rescue failed to exhaust its
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 5
administrative remedies under the Medicare Act. On appeal,
Jet Rescue argues that it was not required to exhaust
administrative remedies before filing suit and that the
exhaustion requirement should have been excused in any
event. We reject both arguments and accordingly affirm the
district court’s judgment.
I
A
Medicare is a federally subsidized health insurance
program covering the elderly and disabled. Under Parts A
and B of the program, which we will refer to as original
Medicare, the federal government pays health care providers
on a fee-for-service basis at rates approved by the agency
that administers Medicare, the Centers for Medicare and
Medicaid Services (CMS). CMS is an agency housed within
the Department of Health and Human Services.
In 1997, Congress amended the Medicare Act by adding
a new Part C, which created the program now known as
Medicare Advantage. Balanced Budget Act of 1997, Pub.
L. No. 105-33, § 4001, 111 Stat. 251 (1997). Under the
Medicare Advantage program, individuals eligible for
Medicare may enroll in health insurance plans offered by
private entities known as Medicare Advantage
organizations, rather than receive benefits on a fee-for-
service basis under Parts A and B. 42 U.S.C. § 1395w-
21(a)(1). CMS enters into contracts with Medicare
Advantage organizations under which CMS pays a fixed
monthly sum per enrollee, § 1395w-23(a)(1)(A), and in
return the Medicare Advantage organization agrees to
provide the health care services that the federal government
would have paid for under Parts A and B. § 1395w-22(a)(1).
A Medicare Advantage organization thus assumes, with
6 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
respect to each enrollee, “full financial risk on a prospective
basis for the provision of the health care services” that would
have been covered under original Medicare. § 1395w-25(b).
Medicare Advantage plans must provide benefits for
services covered under Parts A and B, but they may also
offer “supplemental benefits” for services not covered by
original Medicare. § 1395w-22(a)(3); 42 C.F.R.
§ 422.100(c)(2). Supplemental benefits are paid for entirely
by plan enrollees through additional premiums or cost
sharing. 42 C.F.R. §§ 422.100(c)(2), 422.102(c). They can
be offered as “mandatory” supplemental benefits, which
enrollees in the plan are required to accept, or as “optional”
supplemental benefits, which enrollees are free to accept or
reject as they see fit. § 422.102(a), (b). CMS generally has
little say over the package of supplemental benefits that a
plan chooses to offer, but the terms of all Medicare
Advantage plans must be approved by CMS. 42 U.S.C.
§§ 1395w-26(b), 1395w-27(a); 42 C.F.R. § 422.100(f).
Medicare Advantage organizations can contract with
health care providers to ensure that enrollees are afforded the
benefits promised under the plan. If the agreement between
the plan and these “contract providers” specifies the amount
the provider will accept as payment for services, the plan
generally must pay the provider at the rates specified in the
contract, rather than at the Medicare-approved rates set by
CMS. See RenCare, Ltd. v. Humana Health Plan of Texas,
Inc., 395 F.3d 555, 558–59 (5th Cir. 2004).
In some circumstances, Medicare Advantage plans must
pay for services rendered to plan enrollees even if the
provider does not have a contract with the plan. As relevant
here, those circumstances include situations in which the
enrollee needs ambulance or other emergency medical
services. 42 U.S.C. § 1395w-22(d)(1)(E); 42 C.F.R.
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 7
§§ 422.100(b)(1), 422.113. If the services would have been
covered under Parts A and B, the plan is obligated to pay
these “non-contract providers” at least the Medicare-
approved rate, 42 U.S.C. § 1395w-22(a)(2)(A); 42 C.F.R.
§ 422.100(b)(2), and the non-contract provider is obligated
to accept the Medicare-approved rate as payment in full.
42 U.S.C. § 1395w-22(k)(1); 42 C.F.R. § 422.214(a)(1).
B
The two patients at the center of this case were enrolled
in Medicare Advantage plans offered by Kaiser. In unrelated
incidents, both fell seriously ill while in Mexico and were
unable to receive the care they needed there. Jet Rescue
provided emergency air ambulance services to transport the
patients from Mexico to a Kaiser hospital in San Diego,
California. According to Jet Rescue’s complaint, at the time
of transport both patients assigned their claims for benefits
under Kaiser’s plans to Jet Rescue. Jet Rescue did not have
a contract with Kaiser governing the amount Kaiser would
pay for the services, so Jet Rescue billed Kaiser at its usual
and customary rates: $283,500 for one patient, and $232,700
for the other.
Kaiser refused to pay the billed amounts in full. It took
the position that Jet Rescue’s air ambulance services would
have been covered under original Medicare and thus were
payable at the Medicare-approved rate, which Kaiser
calculated as $23,096 for the first patient and $17,365 for the
second. Kaiser paid Jet Rescue those amounts but refused to
pay the full amount Jet Rescue demanded.
Jet Rescue vigorously disputed Kaiser’s determination
that the services it rendered would have been covered under
original Medicare. Jet Rescue argued that its international
air ambulance services fell outside the scope of original
8 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
Medicare and were instead covered under Kaiser’s plans as
an optional supplemental benefit for which the enrollees paid
an additional premium. Jet Rescue asserted that, because the
plans did not specify a contract rate for the services at issue,
Kaiser was obligated to pay Jet Rescue at its “usual,
reasonable, and customary rate.”
After Kaiser rejected Jet Rescue’s demand for payment
in full, Jet Rescue sought reconsideration as to one of the two
enrollees. In denying the request for reconsideration, Kaiser
reiterated its position that the air ambulance services
provided by Jet Rescue would have been covered under
original Medicare and that Kaiser was therefore obligated to
pay Jet Rescue no more than the Medicare-approved rate.
Jet Rescue did not seek further administrative review of its
claims as to either enrollee. Instead, it sued Kaiser in state
court to recover the additional sums it contends Kaiser owes.
Jet Rescue alleges five causes of action: (1) breach of
contract as the assignee of the enrollees’ right to receive
benefits under their Medicare Advantage plans; (2) breach
of contract as a third-party beneficiary of the plans;
(3) breach of the implied covenant of good faith and fair
dealing; (4) quantum meruit; and (5) violation of
California’s Unfair Competition Law (UCL), Cal. Bus. &
Prof. Code § 17200 et seq. As the basis for its UCL claim,
Jet Rescue alleges that Kaiser deceived enrollees into paying
additional premiums for international air ambulance
coverage that Kaiser does not in fact provide. Jet Rescue
seeks damages of roughly $460,000 plus interest, as well as
injunctive relief on its UCL claim.
Kaiser removed the action to federal court, asserting
jurisdiction under the federal officer removal statute,
28 U.S.C. § 1442(a)(1), and under the federal question
statute, 28 U.S.C. § 1331, on the theory that Jet Rescue’s
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 9
claims arise under (and are completely preempted by) the
Medicare Act. Jet Rescue contests these asserted bases for
federal jurisdiction, but it did not move to remand the case
to state court. Instead, Jet Rescue filed a first amended
complaint in which it alleged that diversity jurisdiction
existed under 28 U.S.C. § 1332.
Kaiser filed a motion to dismiss the first amended
complaint under Federal Rule of Civil Procedure 12(b)(1).
Kaiser argued that Jet Rescue’s failure to exhaust its
administrative remedies under the Medicare Act precluded
the court from exercising subject matter jurisdiction over the
action. The district court granted Kaiser’s motion, and Jet
Rescue timely appealed.
II
Our court has not previously addressed whether
enrollees in a Medicare Advantage plan (or their assignees)
are required to exhaust administrative remedies before
seeking judicial review of a claim for benefits. But the
administrative review scheme under the Medicare
Advantage program is modeled on the administrative review
scheme Congress established under original Medicare. And
it is well settled that original Medicare beneficiaries must
exhaust their administrative remedies before seeking judicial
review of a claim for benefits. For the reasons explained
below, we see no basis for creating a different rule with
respect to administrative exhaustion under the Medicare
Advantage program.
A
As noted, under original Medicare, the federal
government pays providers on a fee-for-service basis for
services covered under Parts A and B. CMS contracts with
10 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
private entities known as “medicare administrative
contractors” to process and pay claims in the first instance,
at rates set by CMS for the service at issue. 42 U.S.C.
§ 1395kk-1(a); 42 C.F.R. § 405.904(a)(2).
To resolve disputes over a Medicare beneficiary’s
entitlement to benefits, Congress established a detailed
administrative review scheme that borrowed elements of the
review scheme governing claims for Social Security
benefits. See 42 U.S.C. § 1395ff(b)(1)(A). Before filing suit
in court, a Medicare beneficiary must proceed through five
levels of administrative review, described in regulations
issued by CMS as follows: (1) an initial determination by the
medicare administrative contractor, 42 C.F.R. § 405.920;
(2) a redetermination by the medicare administrative
contractor, § 405.940; (3) reconsideration by a qualified
independent contractor, § 405.960; (4) a hearing before an
administrative law judge (ALJ) if the amount in controversy
is $100 or more (adjusted for inflation), §§ 405.1000,
405.1006(b); and (5) review by the Medicare Appeals
Council, § 405.1100. If the beneficiary is dissatisfied with
the Appeals Council’s decision, he or she may then seek
judicial review, but only if the remaining amount in
controversy is $1,000 or more (adjusted for inflation).
42 U.S.C. § 1395ff(b)(1)(A); 42 C.F.R. §§ 405.1006(c),
405.1136. 1
In Heckler v. Ringer, 466 U.S. 602 (1984), the Supreme
Court held that federal courts generally lack subject matter
jurisdiction to review the denial of a claim for Medicare
benefits unless the beneficiary exhausts all available levels
1
Providers are also subject to this review process when asserting
claims either on their own behalf, see 42 C.F.R. § 405.906(a)(3), or as
assignees of beneficiaries, § 405.912(a).
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 11
of administrative review. The Court based that holding on
several interlocking statutory provisions, beginning with the
provision of the Medicare Act governing review of claims
for benefits, 42 U.S.C. § 1395ff(b)(1). See Ringer, 466 U.S.
at 605–07. That statute provided then, much as it does now,
that a Medicare beneficiary dissatisfied with the initial
resolution of a claim for benefits “shall be entitled to a
hearing thereon by the Secretary [of Health and Human
Services] to the same extent as is provided in section 405(b)
of this title and to judicial review of the Secretary’s final
decision after such hearing as is provided in section 405(g)
of this title.” 42 U.S.C. § 1395ff(b)(1) (1982). Section
405(g), in turn, allows an individual to seek judicial review
“after any final decision of the [Secretary] made after a
hearing to which he was a party” by filing a civil action in
the appropriate federal district court. 42 U.S.C. § 405(g)
(emphasis added). The Court in Ringer concluded that these
provisions permit judicial review of a claim for benefits
“only after the Secretary renders a ‘final decision’ on the
claim.” 466 U.S. at 605. And the Court noted that, pursuant
to delegated rulemaking authority, “the Secretary has
provided that a ‘final decision’ is rendered on a Medicare
claim only after the individual claimant has pressed his claim
through all designated levels of administrative review.” Id.
at 606.
The Court further held that § 405(g) provides the
exclusive means for obtaining judicial review of a claim for
benefits. Id. at 614–15. The Court based that holding on a
separate provision, 42 U.S.C. § 405(h), which Congress has
12 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
expressly incorporated into each part of the Medicare Act.
42 U.S.C. § 1395ii. 2 Section 405(h) provides:
The findings and decision of the [Secretary]
after a hearing shall be binding upon all
individuals who were parties to such hearing.
No findings of fact or decision of the
[Secretary] shall be reviewed by any person,
tribunal, or governmental agency except as
herein provided. No action against the
United States, the [Secretary], or any officer
or employee thereof shall be brought under
section 1331 or 1346 of Title 28 to recover on
any claim arising under this subchapter.
The Supreme Court construed this provision, together
with § 405(g), as imposing two prerequisites of
jurisdictional stature. The first “consists of a nonwaivable
requirement that a ‘claim for benefits shall have been
presented to the Secretary.’” Ringer, 466 U.S. at 617(quoting Mathews v. Eldridge, 424 U.S. 319, 328 (1976)).
This requirement ensures that beneficiaries cannot bypass
the administrative review process simply by refusing to file
a claim and going straight to court. See id. at 621–22. The
second prerequisite consists of “a waivable requirement that
2
Section 1395ii provides: “The provisions of sections 406 and
416(j) of this title, and of subsections (a), (d), (e), (h), (i), (j), (k), and (l)
of section 405 of this title, shall also apply with respect to this subchapter
to the same extent as they are applicable with respect to subchapter II,
except that, in applying such provisions with respect to this subchapter,
any reference therein to the Commissioner of Social Security or the
Social Security Administration shall be considered a reference to the
Secretary or the Department of Health and Human Services,
respectively.” The subchapter in which § 1395ii appears is subchapter
XVIII, the subchapter that includes the entirety of the Medicare Act.
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 13
the administrative remedies prescribed by the Secretary be
pursued fully by the claimant.” Id. at 617. The upshot:
Section 405(g) provides “the only avenue for judicial
review” of a claim for benefits under the Medicare Act, and
failure to exhaust one’s administrative remedies deprives
federal courts of subject matter jurisdiction over claims
arising under the Act. Id.
As the Court has observed, administrative exhaustion
requirements of the sort imposed by §§ 405(g) and 405(h)
serve important functions. Chief among them are reducing
the burden on courts and facilitating judicial review of
agency action. “Exhaustion is generally required as a matter
of preventing premature interference with agency processes,
so that the agency may function efficiently and so that it may
have an opportunity to correct its own errors, to afford the
parties and the courts the benefit of its experience and
expertise, and to compile a record which is adequate for
judicial review.” Weinberger v. Salfi, 422 U.S. 749, 765
(1975). Bringing the agency’s expertise to bear can be
particularly useful in the Medicare context due to the
enormous complexity of the Medicare Act and its
voluminous regulations. “CMS has extensive experience in
determining the appropriate Medicare reimbursement rates
for different procedures, and billing disputes that require
application of the Medicare regulations can be resolved more
efficiently if they are submitted to the agency in the first
instance.” Tenet Healthsystem GB, Inc. v. Care
Improvement Plus South Central Insurance Co., 875 F.3d
584, 589 (11th Cir. 2017).
14 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
B
When Congress enacted Part C of the Medicare Act in
1997, it imported the same administrative review scheme
described above to resolve disputes between Medicare
Advantage organizations and their enrollees over
entitlement to benefits. See 42 U.S.C. § 1395w-22(g)(5). As
fleshed out in regulations issued by CMS, administrative
review under the Medicare Advantage program involves the
same five levels of review, with only slight modifications.
The first level of review involves an initial determination by
the Medicare Advantage organization itself—called an
“organization determination”—as to the benefits an enrollee
is entitled to receive under the plan. 42 C.F.R. § 422.566(a).
Importantly for our purposes, organization determinations
encompass determinations regarding not only basic benefits
(i.e., services that would have been covered under Parts A
and B) but also supplemental benefits. Id. The ensuing
levels of review include reconsideration by the Medicare
Advantage organization, §§ 422.578, 422.582;
reconsideration by an independent outside entity, § 422.592;
a hearing before an ALJ if the amount in controversy is $100
or more (adjusted for inflation), § 422.600; and review by
the Medicare Appeals Council, § 422.608. An enrollee who
receives an adverse decision from the Appeals Council may
then seek judicial review in federal district court if the
remaining amount in controversy is $1,000 or more
(adjusted for inflation). 42 U.S.C. § 1395w-22(g)(5);
42 C.F.R. § 422.612. 3
The statutory provision establishing this review scheme,
42 U.S.C. § 1395w-22(g), tracks the language of the
3
The regulations state that a provider may pursue these
administrative remedies as an enrollee’s assignee if it waives the right to
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 15
provision quoted above mandating administrative
exhaustion under original Medicare, § 1395ff(b)(1). Section
1395w-22(g) states that, after pursuing the first three levels
of administrative review, an enrollee dissatisfied with the
resolution of a claim for benefits “is entitled, if the amount
in controversy is $100 or more, to a hearing before the
Secretary to the same extent as is provided in section 405(b)
of this title.” § 1395w-22(g)(5). The provision further states
that, “[i]f the amount in controversy is $1,000 or more, the
individual or organization shall, upon notifying the other
party, be entitled to judicial review of the Secretary’s final
decision as provided in section 405(g) of this title.” Id. As
noted earlier, Congress incorporated the provisions of
§ 405(h) into each part of the Medicare Act. § 1395ii. So
the constraints on judicial review imposed by § 405(h) apply
equally to claims for benefits under Part C. See Tenet
Healthsystem, 875 F.3d at 587.
Given this background, we think it evident that Congress
intended to impose under the Medicare Advantage program
the same administrative exhaustion requirement that applies
to claims for benefits under original Medicare. Section
1395w-22(g), like its statutory counterpart under original
Medicare, conditions judicial review on a “final decision” of
the Secretary and channels judicial review through § 405(g),
subject to the same jurisdictional limitations imposed by
§ 405(h). Congress imported these requirements into
§ 1395w-22(g) after the Supreme Court in Ringer had
construed virtually identical language in § 1395ff(b)(1) to
mandate administrative exhaustion as a prerequisite for
obtaining judicial review of a claim for Medicare benefits.
That fact further bolsters the inference that Congress
demand payment from the enrollee. 42 C.F.R. §§ 422.566(c)(1)(ii),
422.574(b).
16 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
intended the provisions of §§ 1395w-22(g) and 1395ff(b)(1)
to be interpreted in the same fashion. See Fitzgerald v.
Barnstable School Committee, 555 U.S. 246, 258–59 (2009).
That Congress intended to impose the same
administrative exhaustion requirement under Part C is not
surprising because the same rationale for requiring
administrative exhaustion under original Medicare applies to
the Medicare Advantage program as well. Medicare
Advantage plans must pay for all services covered under
Parts A and B, so claims for benefits against a Medicare
Advantage organization may involve disputes over how
much an enrollee or her assignee is entitled to be reimbursed
for those services. CMS possesses considerable expertise in
interpreting and applying the detailed regulations
establishing the Medicare-approved reimbursement rates for
such services. Even when disputes arise as to whether a
particular service would or would not have been covered
under Parts A and B—the nature of the dispute in this case—
interpretation of Medicare regulations issued by CMS
defining the scope of coverage will still be necessary. The
agency’s experience and expertise in interpreting those
regulations can aid courts in conducting judicial review as
authorized under the Act.
Accordingly, we conclude that the administrative
exhaustion requirement imposed by Part C includes both of
the jurisdictional prerequisites discussed in Ringer: a non-
waivable “presentment” requirement, and a waivable
requirement that enrollees pursue a claim for benefits
through each available level of administrative review.
In this case, Jet Rescue complied with the non-waivable
presentment requirement by submitting its claims to Kaiser
in the first instance. Congress mandated that Medicare
Advantage organizations establish procedures for making
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 17
initial determinations as to an enrollee’s entitlement to
benefits, and such determinations constitute the first step in
the administrative review process leading to a final decision
by the Secretary. 42 U.S.C. § 1395w-22(g)(1)(A). Thus,
submitting a claim for payment to the Medicare Advantage
organization satisfies the requirement that a “claim for
benefits shall have been presented to the Secretary.” Ringer,
466 U.S. at 617 (quoting Mathews, 424 U.S. at 328).
Jet Rescue has not, however, satisfied the requirement
that “the administrative remedies prescribed by the Secretary
be pursued fully by the claimant.” Id. Jet Rescue does not
dispute that it pursued its assigned claims for benefits
through just two of the five levels of administrative review
as to one enrollee, and through just one level of review as to
the other. Consequently, unless Jet Rescue’s failure to
exhaust its administrative remedies under Part C can be
excused (an issue we address in section IV below), the
district court lacked subject matter jurisdiction over Jet
Rescue’s claims to recover benefits allegedly owed under
Kaiser’s plans. 4
III
Jet Rescue counters the analysis above with two
arguments predicated on the third sentence of § 405(h), the
statutory provision construed by the Court in Ringer to bar
subject matter jurisdiction absent exhaustion of
administrative remedies. As a reminder, the third sentence
provides: “No action against the United States, the
4
We need not decide whether a different conclusion would be
warranted in a case involving a contract provider, the scenario
confronted by the Fifth Circuit in RenCare, Ltd. v. Humana Health Plan
of Texas, Inc., 395 F.3d 555 (5th Cir. 2004).
18 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
[Secretary], or any officer or employee thereof shall be
brought under section 1331 or 1346 of title 28 to recover on
any claim arising under this subchapter.” 42 U.S.C.
§ 405(h). Jet Rescue argues that § 405(h) does not bar its
lawsuit against Kaiser because (1) a Medicare Advantage
organization is not an “officer or employee” of the United
States or the Secretary, and (2) this lawsuit does not involve
claims “arising under” the Medicare Act. We find neither
argument persuasive.
A
Jet Rescue’s first argument hinges on the fact that the
third sentence of § 405(h) eliminates jurisdiction only with
respect to claims brought against an “officer or employee”
of the United States or the Secretary. A Medicare Advantage
organization, Jet Rescue contends, is not an officer or
employee of the United States or the Secretary when
administering a Medicare Advantage plan under Part C.
That is so, Jet Rescue asserts, because a Medicare Advantage
organization bears full financial risk for providing the
benefits that would have been covered under Parts A and B,
and thus cannot be deemed to be acting on either the federal
government’s or the Secretary’s behalf in administering
those benefits. According to Jet Rescue, the same is
necessarily true of any supplemental benefits offered under
a Medicare Advantage plan, since those benefits concern
services not covered by Medicare at all.
We acknowledge the surface appeal of Jet Rescue’s
argument. Labeling Medicare Advantage organizations
“officers or employees” of the federal government or the
Secretary is an awkward fit, given that one of Congress’s
aims in creating the Medicare Advantage program was to
offload responsibility for providing Medicare benefits from
the federal government to private enterprise, thereby
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 19
allowing Medicare to take advantage of innovations driven
by profit motives. See H.R. Rep. No. 105-149, at 1251
(1997). But for three reasons, we are persuaded that
Congress must have regarded Medicare Advantage
organizations as officers or employees of the United States
or the Secretary, at least for purposes of the third sentence of
§ 405(h).
First, although Medicare Advantage organizations are
private entities, they are also an integral part of the
administrative review scheme overseen by the Secretary of
Health and Human Services. As described above, Congress
modeled the Medicare Advantage program’s review scheme
on the review scheme it created for original Medicare, with
one modification: Whereas medicare administrative
contractors make initial benefits determinations for
beneficiaries under original Medicare, Medicare Advantage
organizations make the equivalent “organization
determinations” for their enrollees. As we have seen, a
provider like Jet Rescue satisfies the non-waivable
obligation to present its claims to the Secretary by seeking
an organization determination from the Medicare Advantage
organization. It is hardly surprising, then, that Congress
deemed Medicare Advantage organizations, as the first-level
reviewers of claims for benefits under Part C, to be “officers
or employees” of the Secretary for purposes of § 405(h).
Second, under Jet Rescue’s interpretation of § 405(h),
the detailed administrative review scheme Congress created
would be wholly optional. If Medicare Advantage
organizations were not officers or employees of the United
States or the Secretary under § 405(h), an enrollee
dissatisfied with the organization’s initial determination
could skip the ensuing levels of administrative review and
immediately sue the organization in court. That
20 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
interpretation of the statute would, of course, defeat two of
the primary rationales for creating the administrative review
process in the first place: allowing the agency to bring its
experience and expertise to bear in interpreting the complex
set of regulations governing entitlement to benefits under
Parts A and B, and permitting the agency to compile an
adequate administrative record to facilitate judicial review.
See Salfi, 422 U.S. at 765. We do not believe Congress went
to the trouble of creating a multi-level administrative review
scheme merely to have it invoked (or not) at the pleasure of
enrollees or their assignees, particularly when Congress
modeled that review scheme on one that the Supreme Court
had earlier held to be mandatory and jurisdictional.
Third, if we were to accept Jet Rescue’s interpretation of
the administrative review scheme as wholly optional,
Congress’s imposition of the $1,000 amount-in-controversy
requirement for judicial review would make no sense. By
imposing that requirement, Congress presumably sought to
spare federal courts from having to resolve a deluge of small-
dollar claims for benefits from the more than 26 million
enrollees in Medicare Advantage plans. See Bodimetric
Health Services, Inc. v. Aetna Life & Casualty, 903 F.2d 480,
488 (7th Cir. 1990). Congress required exhaustion of
administrative remedies with the expectation that many
disputes would be resolved without judicial intervention,
and it reserved judicial review for those cases in which the
remaining amount in controversy is relatively substantial.
Yet under Jet Rescue’s interpretation of the third sentence of
§ 405(h)—which would exempt all suits against Medicare
Advantage organizations from the provision’s sweep—any
enrollee dissatisfied with the plan’s initial resolution of a
claim for benefits could immediately file suit in court,
regardless of the amount in controversy.
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 21
Our interpretation of § 405(h)’s third sentence is
consistent, at least in result, with the limited case law that
exists on administrative exhaustion requirements for
Medicare plans provided by private entities. In Tenet
Healthsystem, the Eleventh Circuit concluded that non-
contract providers seeking to recover payment from a
Medicare Advantage organization—just as Jet Rescue seeks
to do here—were required to exhaust their administrative
remedies before filing suit. 875 F.3d at 588. And in Do Sung
Uhm v. Humana, Inc., 620 F.3d 1134 (9th Cir. 2010), we
held that enrollees in a prescription drug plan offered by a
private insurer under Part D of the Medicare Act, which is
similar in some respects to the Medicare Advantage program
created under Part C, were required to exhaust their
administrative remedies before suing the insurer for benefits
in court. Id. at 1143–44. Neither Tenet Healthsystem nor
Do Sung Uhm addressed the “officer or employee” language
in § 405(h)’s third sentence, but the courts could not have
reached the results they did unless the private entity
defendants were considered “officers or employees” of the
United States or the Secretary.
In short, we conclude that a Medicare Advantage
organization qualifies as an “officer or employee” of the
United States or the Secretary, as those terms are used in the
third sentence of § 405(h). 5 We therefore reject Jet Rescue’s
contention that the administrative review scheme established
under Part C is optional rather than mandatory.
5
We have no occasion here to decide whether Medicare Advantage
organizations would qualify as officers or employees of the United States
under other statutes, such as the federal officer removal statute or the
Federal Tort Claims Act. See Ohio State Chiropractic Association v.
Humana Health Plan Inc., 647 F. App’x 619 (6th Cir. 2016); Zanecki v.
Health Alliance Plan of Detroit, 577 F. App’x 394 (6th Cir. 2014).
22 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
B
Jet Rescue’s second argument is that, even if Medicare
Advantage organizations can be considered “officers or
employees” of the United States or the Secretary, the third
sentence of § 405(h) bars jurisdiction only as to claims that
“arise under” the Medicare Act. Because supplemental
benefits offered under Medicare Advantage plans involve
services that would not have been covered under original
Medicare, see 42 C.F.R. § 422.100(c)(2), Jet Rescue
contends that claims for supplemental benefits do not “arise
under” the Medicare Act. As a result, Jet Rescue submits,
an enrollee or assignee pursuing a claim for supplemental
benefits need not comply with Part C’s administrative
exhaustion requirement.
Claims “arise under” the Medicare Act in two
circumstances: “(1) where the ‘standing and the substantive
basis for the presentation of the claims’ is the Medicare Act;
and (2) where the claims are ‘inextricably intertwined’ with
a claim for Medicare benefits.” Do Sung Uhm, 620 F.3d
at 1141 (quoting Ringer, 466 U.S. at 614, 615) (citations
omitted). Because California law provides the substantive
basis for each of Jet Rescue’s claims, we focus here on the
second prong. As we held in Do Sung Uhm, “where, at
bottom, a plaintiff is complaining about the denial of
Medicare benefits,” the claim “arises under” the Medicare
Act. Id. at 1142–43; cf. Ardary v. Aetna Health Plans of
California, Inc., 98 F.3d 496, 500 (9th Cir. 1996) (holding
that state law claims for wrongful death did not arise under
the Medicare Act because they did not seek to recover
benefits).
Jet Rescue’s first four causes of action are contract-based
claims that seek to recover the unpaid amount it billed Kaiser
for transporting the two enrollees from Mexico to Kaiser’s
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 23
hospital in San Diego. Each of these claims is predicated on
Jet Rescue’s status as an assignee of the enrollees’ claims for
benefits under Kaiser’s plans, for without that status Jet
Rescue would have no basis for demanding payment from
Kaiser. The question with respect to these four claims is
whether payment of the benefits Jet Rescue seeks to recover
would constitute a payment of benefits under Part C of the
Medicare Act. We conclude that the answer is yes.
In addressing this issue, we find it unnecessary to resolve
the parties’ dispute over whether the air ambulance services
Jet Rescue provided are covered under Kaiser’s plans as
supplemental benefits (as Jet Rescue contends), or as
benefits that would have been covered under original
Medicare (as Kaiser argues). Even assuming that Jet Rescue
is right on this point, supplemental benefits offered under a
Medicare Advantage plan constitute benefits that are offered
under Part C of the Medicare Act. That is true, in our view,
because the authority to offer supplemental benefits as part
of a Medicare Advantage plan is derived entirely from Part
C of the Act. See 42 U.S.C. § 1395w-22(a)(3).
Jet Rescue’s contention that claims for supplemental
benefits do not “arise under” the Medicare Act—and are
therefore exempt from the administrative exhaustion
requirement—is difficult to reconcile with the statute’s text.
Congress made determinations regarding an enrollee’s
entitlement to basic and supplemental benefits subject to
Part C’s administrative review scheme. Section 1395w-
22(g) defines the first level of administrative review as
“determinations [by a Medicare Advantage organization]
regarding whether an individual enrolled with the plan of the
organization under this part is entitled to receive a health
service under this section and the amount (if any) that the
individual is required to pay with respect to such service.”
24 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
§ 1395w-22(g)(1)(A) (emphasis added). The health services
an enrollee is entitled to receive “under this section” include
those that are covered by the plan’s basic benefits as well as
those covered by the plan’s supplemental benefits. § 1395w-
22(a)(1), (3). That explains why the regulation defining
“organization determinations” includes determinations
regarding “basic benefits as described under § 422.100(c)(1)
and mandatory and optional supplemental benefits as
described under § 422.102.” 42 C.F.R. § 422.566(a). Thus,
to our reading, neither the statute nor the regulation supports
Jet Rescue’s view that claims for supplemental benefits do
not “arise under” Part C of the Medicare Act.
Jet Rescue’s fifth and final cause of action seeks
restitution and injunctive relief for an alleged violation of
California’s UCL. That law prohibits “any unlawful, unfair
or fraudulent business act or practice and unfair, deceptive,
untrue or misleading advertising.” Cal. Bus. & Prof. Code
§ 17200. Jet Rescue alleges that, by advertising coverage for
international air ambulance services as an optional
supplemental benefit but paying for such services at
Medicare-approved rates, Kaiser misled enrollees into
paying for extra benefits that it then failed to provide.
Consumer protection claims do not always “arise under”
the Medicare Act, as we held in Do Sung Uhm. There, the
plaintiffs alleged that the defendant made misrepresentations
regarding the start date for coverage under its Part D
prescription drug plan and the quality of its customer service.
620 F.3d at 1145. Those claims, we said, asserted injuries
that are “collateral to any claim for benefits; it is the
misrepresentations themselves which the Uhms seek to
remedy.” Id. In other words, their claims could be proved
“without regard to any provisions of the [Medicare] Act
relating to provision of benefits.” Id.GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 25
Jet Rescue’s UCL claim is readily distinguishable.
Unlike claims founded on misrepresentations about
coverage start dates or customer service, Jet Rescue’s UCL
claim rests directly on the interpretation of benefits provided
under Kaiser’s Medicare Advantage plans. If Kaiser is
correct that Jet Rescue’s air ambulance services would have
been covered under original Medicare, then Kaiser has not
failed to carry out its obligations under the plans. It may be
that Kaiser’s advertisements led enrollees to erroneously
believe that international air ambulance services would not
be covered unless they paid an additional premium. But
reaching that conclusion would require a determination that
Kaiser’s view of coverage is correct in the first place. If, on
the other hand, Jet Rescue is correct that the services were
covered only as supplemental benefits, Kaiser will
ultimately be required to pay for those services without
regard to any Medicare-approved reimbursement rates. In
that scenario, Kaiser’s advertising regarding optional
supplemental benefits would not be false, but its failure to
pay those benefits in full would be a violation of its
obligations under the plans. Jet Rescue’s UCL claim thus
amounts to a “creatively disguised” claim to recover benefits
under Kaiser’s Medicare Advantage plans. Id. at 1143.
We hold that all of Jet Rescue’s claims are inextricably
intertwined with claims for benefits under Part C of the
Medicare Act. They therefore “arise under” the Act for
purposes of the third sentence of § 405(h) and are subject to
Part C’s mandatory administrative exhaustion requirement.
IV
Jet Rescue contends that even if it was required to
exhaust its administrative remedies, that requirement should
be excused here. We have held that the exhaustion
requirement may be excused if three conditions are satisfied:
26 GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN
(1) the plaintiff’s claim is wholly collateral to a claim for
Medicare benefits; (2) the plaintiff has made a colorable
showing of irreparable harm; and (3) exhaustion would be
futile. See Johnson v. Shalala, 2 F.3d 918, 921 (9th Cir.
1993). Jet Rescue has not met the first and third
requirements, so we need not decide whether it could meet
the second.
As to the first requirement, a claim is deemed
“collateral” in this context when it “is not bound up with the
merits so closely that the court’s decision would constitute
interference with agency process.” Id. at 922 (internal
quotation marks and brackets omitted). In this case, the issue
of proper payment for Jet Rescue’s services is the subject of
an organization determination that is final unless and until it
is reviewed by the agency. See 42 C.F.R. § 422.576.
Excusing exhaustion of administrative remedies would
interfere with the agency’s opportunity to review those
claims. As to the third requirement, because administrative
review would serve the purposes of exhaustion by allowing
the agency to apply its expertise and assemble the relevant
record, such review would not be futile. See Kaiser v. Blue
Cross of California, 347 F.3d 1107, 1115 (9th Cir. 2003).
* * *
Because Jet Rescue failed to exhaust its administrative
remedies and has not shown any basis for excusing that
GLOBAL RESCUE JETS V. KAISER FOUND. HEALTH PLAN 27
requirement, the district court properly dismissed Jet
Rescue’s action for lack of subject matter jurisdiction. 6
AFFIRMED.
6
Ordinarily, when a district court concludes that it lacks subject
matter jurisdiction over an action removed to federal court, the
appropriate remedy is to remand the case to state court. See 28 U.S.C.
§ 1447(c). A narrow “futility” exception to this general rule permits the
district court to dismiss an action rather than remand it if there is
“absolute certainty” that the state court would dismiss the action
following remand. Polo v. Innoventions International, LLC, 833 F.3d
1193, 1197–98 (9th Cir. 2016). That exception applies here because “the
federal law that deprives the federal court of jurisdiction also deprives
the state court of jurisdiction.” Porch-Clark v. Engelhart, 930 F. Supp.
2d 928, 938 (N.D. Ill. 2013). A state court would be compelled to
dismiss this action following remand both because Jet Rescue must first
exhaust its administrative remedies and because any ensuing judicial
action would have to be brought in federal district court. See 42 U.S.C.
§ 405(g).