In a 7-2 decision, the U.S. Supreme Court made it harder to prove that a health plan violates the Medicare secondary payer rules when the plan requires patients to pay high out-of-pocket costs to treat kidney failure with dialysis, when patients who switch exclusively to Medicare coverage, regardless of age, could have dialysis covered at less cost to themselves.
In the dispute over health insurance reimbursements for outpatient kidney dialysis, the Supreme Court agreed in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc. with a self-insured health plan, rejecting a claim from dialysis provider DaVita Inc. that the health plan’s low reimbursement rates violated federal law.
Justice Brett Kavanaugh, author of the majority opinion, was joined by Chief Justice John Roberts and Justices Clarence Thomas, Stephen Breyer and Samuel Alito. In dissent, Justice Elana Kagan was joined by Justice Sonia Sotomayor.
Who Pays for Dialysis?
DaVita, part of UnitedHealth Group’s Optum division, argued that the employee health benefits plan at Marietta Memorial Hospital in Marietta, Ohio, violated the Medicare Secondary Payer Act (MSPA) by treating all dialysis providers as out-of-network and reimbursing them at the lowest-level rate. The MSPA requires private health plans that cover dialysis to be the primary payer of those treatments for at least 30 months after a patient is diagnosed with kidney failure, with Medicare as a secondary payer for Medicare-enrolled patients, to make up for what the employer’s plan won’t pay.
The lack of any in-network dialysis provider, DaVita argued, coupled with the fact that nearly all end-stage renal disease (ESRD) patients needing dialysis qualify for Medicare regardless of age, encouraged plan participants with ESRD to drop their employer-sponsored coverage and elect only to participate in Medicare to avoid high co-pays, co-insurance and deductibles for dialysis care.
According to Katherine Heptig, an attorney at Rivkin Radler in Uniondale, N.Y., the MSPA “requires that Medicare serve as the secondary payer for treatment of ESRD patients [and] prohibits plans from distinguishing between ESRD plan participants and other plan participants,” she wrote when the Supreme Court agreed to hear the case.
Secondary Payer Rules Not Violated
DaVita’s initial lawsuit was dismissed by a district court judge but then reinstated by the U.S. Court of Appeals for the Sixth Circuit, which ruled that the plan violated the MSPA by discriminating against ESRD patients.
The Supreme Court reversed the Sixth Circuit decision and remanded the case to be reheard consistent with the Supreme Court’s ruling.
Kavanaugh wrote, “Because the Marietta plan provides the same outpatient dialysis benefits to all plan participants, whether or not a participant is entitled to or eligible for Medicare, the plan cannot be said to ‘take into account’ whether its participants are entitled to or eligible for Medicare” in a way that the MSPA doesn’t allow.
In her dissent, Kagan wrote, “A reimbursement limit for outpatient dialysis is in reality a reimbursement limit for people with end stage renal disease. And so a plan singling out dialysis for disfavored coverage ‘differentiate[s] in the benefits it provides between individuals having end stage renal disease and other individuals’ ” in a way that is not permitted under the MSPA.
Permissible Discretion
As for other relevant federal statutes, Heptig said that differences in coverage specific to a disability such as ESRD are permissible under the Americans with Disability Act (ADA) if “based on risk factors determined by actuarial calculations or experience.” Allowing for plan discretion under the ADA also is consistent with the Employee Retirement Income Security Act, which precludes only “arbitrary and capricious” interpretations and enforcement of plans, she added.
