June 21, 2022

Supreme Court Decides Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc.

On June 21, 2022, the Supreme Court decided Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc., No. 20-1641, holding that a group health plan that uniformly provides limited benefits for outpatient dialysis to all plan participants does not violate the Medicare Secondary Payer statute (MSPS).

DaVita Inc. provides life-saving medical treatments to individuals living with end-stage renal disease (ESRD). The primary treatment for individuals suffering from ESRD is renal dialysis, which is extremely costly. Some of DaVita’s patients are enrolled in private group health plans. Many also receive health insurance coverage through Medicare.

Medicare provides health insurance coverage to individuals with ESRD, and it covers, among other things, renal dialysis treatments. For those individuals with ESRD who have private health insurance that also covers treatments for ESRD, including dialysis, the MSPS instructs that the private health insurer is to act as the “first” payer for covered ESRD treatments, and Medicare will act as the “secondary” payer for services that the private health insurer does not cover. To ensure that private health insurers do not shift the high costs associated with renal dialysis treatments onto Medicare, the MSPS precludes a private health plan from “differentiat[ing] in the benefits it provides between individuals having [ESRD] and other individuals covered by such plan on the basis of the existence of [ESRD], the need for renal dialysis, or in any other manner.” The MSPS also prohibits a plan from “tak[ing] into account that an individual is entitled to or eligible for” Medicare due to ESRD.

Individuals enrolled in Marietta Memorial Hospital’s employer-sponsored group health plan (the “Plan”) sought treatment from DaVita for ESRD. After DaVita treated those patients, it submitted claims to the Plan for payment. The Plan paid only a small portion of those claims based on terms in its plan document applicable to all plan participants that purported to limit the reimbursement rates for renal dialysis treatments. DaVita sued the Plan and alleged that the Plans’ reimbursement limitations violated the MSPS.

After the United States District Court for the Southern District of Ohio dismissed DaVita’s claims, the United States Court of Appeals for the Sixth Circuit reversed. The United States Supreme Court granted certiorari to resolve a circuit split and ultimately reversed the Sixth Circuit.

The Court held that because the Plan’s reimbursement limitations for renal dialysis applied uniformly to all participants, the Plan did not impermissibly differentiate between participants with and without ESRD. It rejected the argument that the disparate impact of the reimbursement limitations on individuals with ESRD constitutes impermissible differentiation. The Court thus had no occasion to consider whether the Plan’s terms differentiated between its participants “on the basis” of certain participants having ESRD, needing renal dialysis, or in any other manner. And because the Plan applied the same coverage limitations to all of its participants, it did not impermissibly “take into account” an individual’s eligibility for or entitlement to Medicare.

Justice Kavanaugh delivered the opinion for the Court. Justice Kagan filed an opinion dissenting in part, with whom Justice Sotomayor joined.

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