Supreme Court rules against DaVita in favor of health plan

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In a 7-2 decision, the U.S. Supreme Court has sided with a health plan over its coverage for outpatient dialysis services.

Major dialysis service provider DaVita had sued the Marietta Memorial Hospital Employee Health Benefit Plan claiming its limited coverage violated the statute.

The Justices ruled against DaVita in an opinion released Tuesday. Justice Brett Kavanaugh delivered the opinion of the Court, in which Chief Justice John Roberts and Justices Clarence Thomas, Stephen Breyer, Samuel Alito, Neil Gorsuch and Amy Coney Barrett joined. Justice Elena Kagan filed an opinion dissenting, in part, in which Justice Sonia Sotomayor joined.

Justice Kavanaugh said the question was whether a group health plan that provides limited benefits for outpatient dialysis – but does so uniformly for all plan participants –violates the Medicare Secondary Payer statute. 

"We agree with petitioner Marietta and the United States as amicus curiae that the answer is no," Kavanaugh wrote. "We therefore reverse the judgment of the U. S. Court of Appeals for the Sixth Circuit and remand the case for further proceedings consistent with this opinion."  

WHY THIS MATTERS

DaVita is a major dialysis provider in the United States.

Javier Rodriguez, CEO for DaVita said by statement: "Alongside the kidney care community, we are deeply disappointed by today's Supreme Court decision to upend an important protection for Americans with chronic kidney failure. The MSPA was created to protect some of the most vulnerable patients in the healthcare system, who deserve unobstructed access to the coverage that best suits their individual health needs. Today's narrow interpretation of this statute limits its ability to achieve this purpose. Dialysis patients deserve better, and we'll continue to advocate for patient choice in care and coverage."

DaVita sued Marietta Memorial Hospital Employee Health Benefit Plan in 2018, saying its limited coverage for outpatient dialysis violated the Medicare Secondary Payer statute.

The statute makes Medicare a secondary payer to existing insurance coverage for certain medical services, including dialysis.

To prevent plans from circumventing their primary payer obligation for end-stage renal disease treatment, the statute imposes two constraints, according to the ruling: Plans may not differentiate in the benefits they provide individuals having end-stage renal disease and other individuals needing renal dialysis; and they may not take into account that an individual is entitled to, or eligible for, Medicare.

DaVita claimed the Marietta plan violated both of those constraints. The district court dismissed DaVita's claims. The U.S. Court of Appeals split on its decision and reversed the lower court ruling, saying it had a disparate impact on individuals with end-stage renal disease.

Justice Brett Kavanaugh, writing for the majority, said the Marietta Plans' coverage terms for outpatient dialysis did not violate the statute because those terms applied uniformly to all covered individuals.

"Because the Marietta Plan's terms apply uniformly to individuals with and without end-stage renal disease, the plan does not 'differentiate in the benefits it provides between individuals' with and without end-stage renal disease," Kavanaugh wrote.

He continued: "DaVita argues that the statute authorizes liability even when a plan limits benefits in a uniform way if the limitation on benefits has a disparate impact on individuals with end-stage renal disease. But the text of the statute cannot be read to encompass a disparate-impact theory. The statutory provision simply coordinates payments between group health plans and Medicare; the statute does not dictate any particular level of dialysis coverage." 

Justices Kagan and Sotomayor disagreed. In her minority opinion, 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.'"

This is because, she said, 97% of people diagnosed with end-stage renal disease – all those who do not obtain a pre-emptive kidney transplant – undergo dialysis. Ninety-nine-and-a-half percent of DaVita's outpatient dialysis patients have or develop end-stage renal disease, Kagan said.

"The majority holds that the plan here does not so 'differentiate' because it draws distinctions only between dialysis and other treatments – not between individuals with end-stage renal disease and individuals without it. That conclusion flies in the face of both common sense and the statutory text. One fact is key to understanding this case: Outpatient dialysis is an almost perfect proxy for end-stage renal disease." 

THE LARGER TREND

Medicare provides health insurance coverage for those who are 65 or over, or are disabled. In 1972, Congress extended Medicare coverage to individuals with end-stage renal disease, regardless of age or disability. 

That benefit covers hundreds of thousands of Americans with end-stage renal disease at a high cost to Medicare: an estimated $50 billion annually, according to the Supreme Court ruling. 

Medicare initially acted as the first payer for many medical services, regardless of whether a Medicare beneficiary was also covered under another insurance plan, such as an employer-sponsored group health plan. 

In 1980 and 1981, in part due to rising Medicare costs, Congress enacted and amended the Medicare Secondary Payer statute, the court said. That statute, as amended, makes Medicare a "secondary" payer to an individual's existing insurance plan for certain medical services, including dialysis, when that plan already covers the same services. 

"Given the significant costs of healthcare for those with end-stage renal disease, Congress recognized that a plan might try to circumvent the statute's primary-payer obligation by denying or reducing coverage for an individual who has end-stage renal disease, thereby forcing Medicare to incur more of those costs," the ruling said. "To prevent such circumvention, the statute imposed two specific constraints on group health plans."

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org