Supreme Court Issues Ruling in Dialysis Case

In a 7-2 decision, the U.S. Supreme Court has issued its opinion in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc., ruling in favor of Marietta Memorial Hospital’s health plan. In the Court’s opinion, drafted by Justice Brett Kavanaugh, the Court held the plan did not violate a federal statute which obligates private insurers to cover the first 30 months of dialysis following a patient’s end-stage renal disease diagnosis. In the opinion, which reversed the judgment of the U.S. Court of Appeals for the Sixth Circuit, Justice Kavanaugh opined, “The question in this case is 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.”

In 2018, DaVita, Inc. sued Marietta Memorial Hospital’s health plan stating that the organization’s coverage for outpatient dialysis differentiated between individuals with and without end-stage renal disease, and in doing so, violated the Medicare Secondary Payer Act. Specifically, DaVita argued that by treating all dialysis providers as out-of-network providers and reimbursing them at the lowest level rate, the plan was encouraging patients to drop their employer-sponsored coverage in favor of electing Medicare to avoid the high copays, co-insurance rates and deductibles associated with the care under the plan. The Medicare Secondary Payer Act requires Medicare to act as the secondary payer for treatment of end-stage renal disease if the following are true: 1. The beneficiary is within a 30-month coordination period, 2. The beneficiary is on Medicare solely due to end-stage renal disease, and 3. The beneficiary is covered by a group health plan. In other words, the statute requires private insurers to cover the costs of dialysis for the first 30-months after a patient is diagnosed with end-stage renal disease and prevents plans from differentiating, with respect to the benefits received, between individuals with and without end-stage renal disease.

The Court’s opinion hinged on the view that Marietta’s plan did not differentiate in coverage between those with and without end-stage renal disease because the plan “provides the same benefits, including the same outpatient dialysis benefits” to both groups. Further, the opinion states that the statutory provision DaVita cites in their claim “simply coordinates payments between group health plans and Medicare” and “does not dictate any particular level of dialysis coverage by the group health plan.” The Court also states, “If Congress wanted to mandate that group health plans provide particular benefits, or to require that group health plans ensure parity between different kinds of benefits, Congress knew how to write such a law. It did not do so in this statute.”

While it is not immediately clear how plans will proceed in light of this decision, the ruling in this case may open the door for plans to update the language in their plan documents to allow for dialysis carve-outs within the parameters established by the Court’s opinion in this case. With that said, the Court’s ruling does not outright eliminate the limitations within the Medicare Secondary Payer Act. A poorly designed carve-out can easily run afoul of the provisions under the Act and open up the plan for litigation like this.

If Innovative clients have any questions, please contact your account team. If you would like assistance in dialysis carve out, one of our account consultants is happy to help.