Sunday, February 16, 2020

Wyoming’s Continued Struggles with Air Ambulances and Federal Preemption

There is a very close relationship between two federal preemption provisions that are having an impact on state employment law and state workers’ compensation systems. One such provision, in the Airline Deregulation Act (49 U.S.C. § 41713), prevents state workers’ compensation systems—including Wyoming’s—from regulating payments to air ambulance operators for transportation of injured workers. A second such provision, under the FAAAA (49 U.S.C.§ 14501(c)), is (temporarily) interfering with California’s application of the ABC employee test to workers of truck carriers. ADA preemption was “created” in the late 1970s and modelled on the ERISA preemption provision (29 U.S.C. § 1144). FAAAA preemption was modelled on ADA preemption and enacted in the mid-1990s. This post is specifically about ADA preemption as it concerns air ambulance services in Wyoming, but each of the preemption provisions just mentioned creates regulatory “dead zones” in which no substantive federal regulation on certain important state problems exists, and no state regulation on those problems is possible. This is a real federalism mess.

A proposed Wyoming bill related to air ambulance coverage of injured workers has emerged (the bill would tentatively locate the law at W.S. 27-14-401). Under 27-14-401(j) “Emergency and medically necessary air ambulance transport services for an employee shall be covered under W.S. 42-4-123, subject to availability and any limitations specified by the department under W.S. 42-4-123(a). The department of workforce services shall pay reimbursement for services under this section to the department of health as specified under W.S. 42-4-123.

Current 42-4-123 (effective as of 4/1/2020) requires the state department of health, with approval of the governor to apply to HHS for a Medicaid waiver “to make coverage of air ambulance transport services through Medicaid available to all Wyoming residents, except that coverage may be limited to specified groups of Wyoming residents as necessary to obtain approval.” The same 42-4-123 created an “air ambulance transport services program” under the auspices of the state department of health. Following transportation, “the air ambulance provider shall provide services under this section if the provider otherwise makes air ambulance transport services available to persons in Wyoming who are eligible for Medicaid independent of the coverage provided by this section” and “shall accept payment under this subsection as full satisfaction of all charges, costs and fees relating to air ambulance transport services” though “an air ambulance provider shall [in specified instances I won’t discuss here] collect a copay or other cost sharing requirement for services covered under this section . . .

The state structure goes on from there, but this is enough of an exposition to facilitate discussion. The first time I saw 42-4-123, I surmised the model was an attempt to maneuver the federal government into indirectly limiting the cost of an air ambulance trip, and I wondered why CMS would grant such a waiver. It turns out, as explained in CMS's letter of last month, that it won’t:

Section 1115(a) of the [Social Security] Act cannot be used to circumvent other federal statutes, including the preclusion clause set forth in the Airline Deregulation Act of 1978, which specifically precludes state regulation of matters related to air carrier rates, routes, and services. As noted above, the Secretary may approve a demonstration project under section 1115(a) of the Act if, in his judgment, the project is likely to assist in promoting the objectives of title XIX . . . While the proposed Wyoming Medicaid Coordinated Air Ambulance Network demonstration is expected to serve Medicaid beneficiaries, those services are already authorized in Wyoming’s Medicaid state plan. Using the Medicaid administrative structure to provide services to other individuals in the state as a mechanism to avoid the application of federal aviation law is a clear departure from the core, historical mission of the Medicaid program to provide health coverage to the Medicaid eligible population. (Emphases supplied)

Perhaps even more to the point,

Furthermore, CMS will not approve a demonstration project under section 1115(a) of the Act unless the project is expected to be budget neutral, that is, the demonstration project may not result in Medicaid costs to the federal government that are greater than what the federal government’s Medicaid costs in the state would likely be absent the demonstration. The state's proposed approach to budget neutrality as provided in its application does not indicate that the proposed Wyoming Medicaid Coordinated Air Ambulance Network demonstration is or would ever be budget neutral. (Emphases supplied)

Translation: what the federal government allows for charges under Medicaid for air ambulance transportation is a function of many complex variables, and that cost function “might” be thrown into disarray by allowing an air ambulance carveout Medicaid expansion for a state’s entire population. (It might be worth mentioning here that the Wyoming legislature has rejected Medicaid expansion).

I think there is something to the air ambulance industry’s argument that Wyoming’s proposed approach would essentially ration air ambulance services for its citizens. As a Wyoming Public Radio/NPR story explained last summer before CMS rejected the model:

Wyoming officials propose to reduce the number of air ambulance bases and strategically locate them, to even out access. The state would then seek bids from air ambulance companies to operate those bases at a fixed yearly cost. It’s a regulated monopoly approach, similar to the way public utilities are run . . . “You don't have local privatized fire departments springing up and putting out fires and billing people . . . The town plans for a few fire stations, decides where they should be strategically, and they pay for that fire coverage capacity.” . . . Medicaid would cover all the air ambulance flights in Wyoming — and then recoup those costs by billing patients’ insurance plans for those flights. A patient's out-of-pocket costs would be capped at 2% of the person's income or $5,000, whichever is less, so patients could easily figure out how much they would owe. Officials estimate they could lower private insurers' average cost per flight from $36,000 to $22,000 under their plan.

Injured workers would be captured within the same structure and might be disparately impacted under it. This would raise difficult workers’ compensation quid pro quo questions. On the one hand, Wyoming workers traded tort rights for workers’ compensation benefits, and paying $5000 out of pocket for work-related injury expenses would violate that principle. On the other hand, the quid pro quo did not contemplate a federal benefits structure like Medicaid into which medical costs could be substantially subsumed. The quid pro quo moreover takes on a different complexion if the only remedy to which any state citizen is entitled is a federalized Medicaid recovery (leaving to one side the Wyoming state constitutional requirement, in Art. 10, Sec. 4, that the only exception to the right of tort damages for physical injury is workers’ compensation benefits). In fairness, the Wyoming model—notwithstanding the recent bill, the timing of which I don’t quite understand—never had a chance to get off the ground, so it was not yet clear precisely how the statewide model would interact with Wyoming’s monopolistic workers’ compensation system. Given CMS’s position, the model seems a dead letter now (and I think the statute, if challenged, would still have had to fight off ADA preemption arguments).

Michael C. Duff

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