As is often true in cases before the U.S. Supreme Court, the legal issues in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita are numerous and complicated. But the bottom line is relatively simple. In this case the Court will decide whether private health insurance plans may treat dialysis coverage less favorably than other plan benefits. DaVita, a dialysis provider, claims that “Patient A” dropped her private health insurance with Marietta Memorial Hospital Employee Health Benefit Plan and switched to Medicare because her private plan offered less favorable dialysis coverage.
In 1972, Congress made Medicare the primary payer for individuals with end-stage renal disease (ESRD). In 1981, Congress amended the Medicare Secondary Payer Act (MSPA) to require that private insurance plans covering ESRD are the primary payers for, currently, 30 months.
Patient A has end-stage renal disease (ESRD) which requires dialysis. Patient A’s health benefits plan disadvantages dialysis coverage by: considering all dialysis providers out-of-network, subjecting Patient A to higher copayments, coinsurance amounts, and deductibles; reimbursing dialysis at 87.5% of the Medicare rate instead of paying the “reasonable and customary fee”; and subjecting dialysis to heightened scrutiny.
DaVita argues that treating dialysis benefits less favorably than other benefits violates the MSPA. Marietta Memorial Hospital Employee Health Benefit Plan argues it hasn’t violated the MSPA because it provides the same dialysis benefits to all plan participants and reimburses dialysis providers uniformly regardless of whether the patient has ESRD. The Sixth Circuit agreed with DaVita that the health plan may have violated three provisions of the MSPA.
First, the MSPA states that a group health plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.”
According to the Sixth Circuit, the “distinguishing feature of being diagnosed with ESRD is one’s significant need for renal dialysis. Thus, the Plan discriminates against ESRD patients based on their need for dialysis by targeting the primary treatment that individuals with ESRD (1) need exclusively, with the exception of rare, non-ESRD patients, and (2) need with far greater frequency than those few non-ESRD dialysis-users.”
The Sixth Circuit also concluded that the “or in any other manner” language in the MSPA could support a disparate impact claim against the plan. The Sixth Circuit opined that the plan in this case “may have devised a reimbursement system that has the effect of singling out ESRD patients.”
Third, the MSPA states that a group health plan “may not take into account that an individual is entitled to or eligible for [Medicare benefits due to ESRD]” during the thirty-month period when the plan is primary to Medicare.
According to the Sixth Circuit this provision may be violated because: “DaVita’s central allegation in this case is that ESRD patients . . . are singled out for differential treatment because their costs are expensive and could be shifted to Medicare. If DaVita shows, through discovery, a ‘near-perfect overlap’ between Medicare-entitled patients (via ESRD diagnosis) and dialysis patients, then it may show that, compared to other Plan enrollees, Medicare-entitled individuals are subject to reduced benefits.”