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U.S. Supreme Court: MSP Rules Do Not Preclude Limited Coverage for Outpatient Dialysis



Marietta Mem’l Hosp. Emp. Health Benefit Plan v. DaVita Inc., 2022 WL 2203328 (U.S. 2022)

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The U.S. Supreme Court has ruled that a group health plan does not violate the Medicare Secondary Payer (MSP) rules by limiting coverage for outpatient dialysis—a treatment used almost exclusively for patients with end-stage renal disease (ESRD). In the underlying case, a large dialysis provider sued the plan and its TPA, challenging the plan’s classification of all dialysis providers as “out-of-network,” resulting in a lower reimbursement rate for them than for providers of other medical services. Acknowledging that the plan provision applied equally to all covered individuals receiving dialysis, the provider nevertheless argued that nearly all dialysis patients have ESRD, so the lower reimbursement rate for dialysis than for other treatments effectively discriminated against ESRD patients and had a disparate impact on them, in violation of the MSP rules. A federal trial court dismissed the claim, but the Sixth Circuit revived it, holding that the MSP antidiscrimination provisions prohibit conduct beyond the express differential treatment of ESRD patients (see our Checkpoint article). Two months later, in a similar case involving the same dialysis provider, the Ninth Circuit rejected the provider’s disparate impact argument, ruling that the MSP statute prohibits group health plans from providing different benefits to ESRD patients than to patients without the condition, but it does not bar other differences that merely have a disproportionate effect on ESRD patients (see our Checkpoint article). The conflicting decisions by the two appellate courts set the stage for the Supreme Court’s review.

Finding no MSP violation, the Court ruled in favor of the plan. The Court acknowledged that the MSP statute prohibits a plan from differentiating in benefits between individuals with and without ESRD or taking into account the Medicare eligibility of an ESRD patient. The Court concluded, however, that the plan provided the same benefits to all plan participants regardless of whether they had ESRD. Thus, the plan neither differentiated in benefits nor took into account Medicare eligibility due to ESRD. Rejecting the argument that the MSP statute also authorizes liability if a uniform coverage limitation has a disparate impact on ESRD patients, the court concluded that neither the statute’s text nor its implementing regulations encompass a disparate-impact theory. The Court further opined that such a theory would be practically impossible to administer because it is premised on the idea that plans must provide “adequate” coverage for dialysis, with no guidance as to what is adequate.

EBIA Comment: The Court’s ruling seems likely to encourage insurers and group health plans to reduce coverage for outpatient dialysis, thereby shifting the cost of dialysis to Medicare. The two dissenting justices observed that the Court’s opinion “tells plans they can do just that, so long as they target dialysis, rather than the patients who rely on it, for disfavored coverage.” Although the dissenting justices declared that “Congress would not—and did not—craft a statute permitting such a maneuver,” plans appear to be safe in taking this approach, at least for the time being. 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.

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