A California federal court determined that the amended Medicare Act preempts California arbitration notice and disclosure requirements in health insurer/patient agreements.

In Clay v. Permanente Medical Group, Inc., No. 06-7926 SC, 2007 WL 4374273 (N.D. Cal. Dec. 14, 2007), Rodney Clay and his wife Deborah Clay became members of the Kaiser Foundation Health Plan (Health Plan). Rodney developed kidney problems and it became necessary for him to receive a kidney transplant. He was transferred back and forth between two medical centers and died before he could receive the transplant.

Deborah brought suit against Permanente Medical Group, the Kaiser Foundation Health Plan and others (collectively "Permanente"). After Deborah refused to arbitrate the claim in accordance with the arbitration agreement included in the Health Plan, Permanente moved to compel arbitration.

The Court rejected Deborah's argument that the arbitration agreement was unenforceable because it did not meet the notice and disclosure requirements under California law. See CA HLTH & S § 1363.1.

Instead, the Court agreed with Permanente that the Medicare Act explicitly preempts California law by its language: "[t]he standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part." 42 U.S.C. § 1395w-26(b)(3).

These regulations specifically reference marketing materials, including the Evidence of Coverage which Rodney signed as part of his entry into the Health Plan, and disclosure requirements. See 42 C.F.R. §§ 422.80 & 422.111.

Moreover, in the Conference Report accompanying the amendment, Congress demonstrated its intent for the Medicare Act to have broader preemption of state law.

Both arguments raised by Deborah failed because they relied on earlier versions of the Medicare Act. The 2004 version of the Medicare Act governed the events that led to this dispute.

Accordingly, the Medicare Act preempted the California law regarding notice and disclosure requirements of arbitration agreements. Deborah was required to submit her claims to arbitration.