Ninth Circuit Rejects Dialysis Provider’s MSP Disparate Impact Claim

A provider of end-stage renal disease (ESRD) treatment sued an employer and the employer’s self-insured health plan, alleging that the plan violated the Medicare Secondary Payer (MSP) rules when it adopted a cost-containment program for kidney dialysis treatments, eliminating in-network coverage and reducing reimbursement for kidney dialysis treatment. Alleging that its reimbursements from the plan were “far less” after the cost-containment program was implemented, the provider argued that the plan’s cost-containment program impermissibly took into account ESRD-based Medicare eligibility and differentiated in benefits between ESRD patients and other individuals covered under the plan. The trial court dismissed the provider’s claim, concluding that the plan did not violate the MSP rules because it reimbursed at the same rate for all dialysis services, regardless of underlying diagnosis and regardless of Medicare eligibility (see our Checkpoint article).

On appeal, the Ninth Circuit affirmed the trial court’s decision, noting that dialysis is a potential treatment for all persons, not just for those with ESRD, and the plan uniformly reimburses a provider for dialysis whether or not the patient has ESRD. The provider conceded that dialysis is not exclusively a treatment for ESRD but emphasized that most people who receive dialysis have ESRD. Thus, the provider argued, the plan’s reduced reimbursement for dialysis treatment had a “remarkably disproportionate effect” on individuals with ESRD. The Ninth Circuit rejected this disparate impact theory, however, concluding that the MSP statute prohibits group health plans from providing different benefits to individuals with ESRD than to those who do not have ESRD, but it does not bar other differences that merely have a disproportionate effect on individuals with ESRD. Regulations permitting uniform limitations on particular services, regardless of their disparate impact on ESRD patients, further supported the court’s conclusion. The court expressly noted its disagreement with a recent Sixth Circuit decision allowing a similar claim by the same provider based on a disparate impact theory (see our Checkpoint article).

EBIA Comment: The conflict between the two appellate courts adds further confusion for health plans trying to limit the costs of dialysis treatments. And, as the Ninth Circuit points out, cost concerns may escalate as some former COVID-19 patients face long-term challenges, including acute kidney injury (which, unlike ESRD, does not make an individual eligible for Medicare). Health plan sponsors and their advisors should continue to watch closely as these and similar cases progress through the courts. For more information, see EBIA’s Group Health Plan Mandates manual at Sections XXIV.A (“What Are the Medicare Secondary Payer (MSP) Requirements and Who Must Comply?”), XXIV.C (“Overview of Medicare”), and XXIV.H (“MSP Requirements: ESRD-Based Medicare Eligibility or Entitlement”). See also EBIA’s Self-Insured Health Plans manual at Section XXV.C (“Coordination of Benefits With Medicare, TRICARE, and Medicaid”).

Contributing Editors: EBIA Staff.