Director, Center for Supreme Court AdvocacyNational Association of Attorneys General
This Report summarizes opinions issued on June 21, 2022 (Part I); and cases granted review on that date (Part II).
Opinion: Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc., 20-1641
Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc., 20-1641. In a 7-2 decision, the Court held that a group health plan that provides limited benefits for outpatient dialysis, but does so uniformly for all plan participants, does not violate the Medicare Secondary Payer statute, 42 U.S.C. §1395. Congress has extended Medicare coverage to individuals with end-stage renal disease regardless of their age or other disability. By statute, Medicare is a “secondary” payer to an individual’s existing insurance plan when that plan covers the same services. DaVita provides dialysis to thousands of individuals each year, including individuals insured by their employers’ group health plans. The Marietta Memorial Hospital Employee Health Benefit Plan offers the same terms of coverage for outpatient dialysis to all its participants, but those services are subject to limited reimbursement under the Plan. DaVita sued the Plan, arguing that this limited coverage violates the statute by (1) differentiating between individuals with and without end-stage renal disease, and (2) taking into account the Medicare eligibility of individuals with end-stage renal disease. The Sixth Circuit agreed with DaVita, holding that the statute prohibits plans that have a disparate impact on its participants, and that the Marietta Plan has a disparate impact on individuals with end-stage renal disease. In an opinion by Justice Kavanaugh, the Court reversed.
Given the significant costs of healthcare for those with end-stage renal disease, and worried that an insurance plan might try to deny or reduce coverage for individuals with end-stage renal disease, Congress imposed two specific constraints on group health plans. First, a 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.” The Court held that the Marietta Plan does not violate this provision; to the contrary, “[t]he Marietta Plan provides the same benefits, including the same outpatient dialysis benefits, to individuals with and without end-stage renal disease.” The Court rejected DaVita’s argument that the statute forbids plans from limiting benefits in a way that has a “disparate impact” on individuals with end-stage renal disease. The Court held that the text of the statute cannot be read to encompass a disparate impact theory, and such a theory would be nearly impossible to implement―courts would need to determine what minimum level of coverage is adequate considering numerous health issues, negotiations with third parties, the needs of a particular plan’s beneficiaries, and other factors such as geography. Without any guidance in the statute, courts would be “entirely at sea.” In a footnote, the Court rejected a related “proxy” theory, where DaVita argued that singling out outpatient dialysis is an impermissible proxy for singling out individuals with end-stage renal disease because those individuals disproportionately receive outpatient dialysis. The statute forbids differentiating “benefits,” said the Court; it is not an antidiscrimination statute.
Second, the statute provides that a plan “may not take into account that an individual is entitled to or eligible for” Medicare due to end-stage renal disease. Here, found the Court, the Plan uniformly covers outpatient dialysis for all individuals. “Because the Plan provides the same outpatient dialysis benefits to all Plan participants, whether or not a participant is entitled to or eligible for Medicare, the Plan cannot be said to ‘take into account’ whether its participants are entitled to or eligible for Medicare.” The Plan does not impermissibly take into account eligibility for Medicare simply because it offers limited coverage for outpatient dialysis.
Justice Kagan dissented in part, joined by Justice Sotomayor. These two Justices agreed with the majority that the disparate-impact theory was unpersuasive and that the Marietta Plan did not improperly take Medicare eligibility into account, but they were persuaded by DaVita’s “proxy” theory. “Outpatient dialysis is an almost perfect proxy for end stage renal disease. Virtually everyone with end stage renal disease―and hardly anyone else―undergoes outpatient dialysis.” Thus, courts should not care whether a plan “differentiates in benefits by targeting people with end stage renal disease, or instead by targeting the use of dialysis.” “A reimbursement limit for outpatient dialysis is in reality a reimbursement limit for people with end stage renal disease,” and a plan singling out dialysis for disfavored coverage effectively differentiates between individuals with and without renal disease. The dissent found this conclusion bolstered by the statute’s provision that a plan may not differentiate due to the “need” for dialysis. Plans should not be able to differentiate among participants by targeting the treatment type rather than the disease when 99.5% of dialysis patients have or develop end stage renal disease. By permitting such a distinction, said the dissent, the majority undermines the statute’s purpose by allowing plans to foist the cost of dialysis onto Medicare.