DaVita, Inc. v. Amy’s Kitchen, Inc., 2019 WL 1509186 (N.D. Cal. 2019)
A provider of end-stage renal disease (ESRD) treatment sued an employer, alleging that it violated the Medicare Secondary Payer (MSP) rules by amending its group health plan to eliminate in-network coverage and reduce reimbursement for kidney dialysis treatment. The provider argued that the plan impermissibly took into account an individual’s ESRD-based Medicare eligibility and differentiated in benefits between ESRD patients and other individuals covered under the plan. It claimed that the plan violated these foundational MSP requirements by eliminating in-network coverage of dialysis, thereby creating an incentive for patients with ESRD to drop out of the plan and rely on Medicare, where their payments would be significantly lower. The employer argued that its plan did not violate the MSP requirements because it treated ESRD patients who were entitled to enroll in Medicare the same as non-Medicare-eligible dialysis patients.
The court dismissed the provider’s claim, concluding that the plan did not impermissibly distinguish between Medicare-eligible and non-Medicare-eligible dialysis patients. The court pointed out that the plan differentiated on the basis of the medical service provided—dialysis—not based on a patient’s ESRD diagnosis or Medicare eligibility. In fact, the plan made no mention of Medicare eligibility as a basis for coverage. Even if the plan’s dialysis treatment provision had the effect of denying benefits to ESRD-based Medicare participants, it had the same effect for patients receiving dialysis who were not Medicare-eligible.
EBIA Comment: The MSP rules are complex, especially when ESRD is involved. And even though plans cannot “take into account” ESRD-based Medicare eligibility or impermissibly differentiate in benefits for individuals eligible for ESRD-based Medicare, the MSP rules do not prohibit limiting the utilization of a covered service, such as dialysis, so long as the plan’s limits apply uniformly to all plan enrollees. 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 COBRA manual at Section XXX.B (“The Interactions Between COBRA and Medicare”) and EBIA’s Self-Insured Health Plans manual at Section XXV.C (“Coordination of Benefits With Medicare, TRICARE, and Medicaid”). You may also be interested in our webinar “Medicare and COBRA: Understanding the Interaction and Avoiding Common Mistakes” (recorded on 2/14/2019).
Contributing Editors: EBIA Staff.