This Report summarizes cases granted review on October 29 and November 5, 2021 (Part I).
Cases Granted Review: Marietta Memorial Hospital Employee Health Benefit Plan v. Davita, Inc., 20-1641
Marietta Memorial Hospital Employee Health Benefit Plan v. Davita, Inc., 20-1641. The Medicare Secondary Payer Act prohibits a health plan from “tak[ing] into account” that a plan participant with end stage renal disease (ESRD) is eligible for Medicare benefits; and from “differentiat[ing]” between such individuals and others in the benefits it provides. Most but not all people that use dialysis have ESRD. At issue in this case is whether a health plan that provides low benefits for all dialysis patients violates these provisions. The Sixth Circuit held that it does, finding that the provisions (particularly the “non-differentiation” provision) create disparate-impact liability. The Ninth Circuit has reached the opposite conclusion.
The Marietta Memorial Hospital Employee Health Benefit Plan provides three tiers of reimbursement benefits, with the bottom tier applying to out-of-network providers. The Plan classifies all dialysis providers as out-of-network and thus subject to the lowest reimbursement level. Plus, whereas most out-of-network providers in the bottom tier are reimbursed at a “reasonable and customary” fee based on industry-wide standards, the Plan caps reimbursement for dialysis at 87.5% of the Medicare rate, which is itself already lower than the “reasonable and customary” industry-wide fee. Respondents, the leading providers of dialysis treatments in the United States, filed suit on their own behalf and on behalf of “Patient A,” alleging that the Plan’s treatment of dialysis providers differently from other medical providers violates the Medicare Secondary Payer Act and ERISA. (Patient A was a patient with ESRD who, after receiving the Plan’s low benefits for dialysis, dropped the Plan as a primary insurance provider and switched to Medicare.) The district court granted the Plan’s motion to dismiss, holding in relevant part that the Plan had not discriminated unlawfully against individuals with ESRD through its reimbursement system. A divided panel of the Sixth Circuit reversed and remanded. 978 F.3d 326.
The Sixth Circuit found that a health plan can violate the “non-differentiation” and “takes into account” provisions even though the plan does not expressly differentiate between ESRD patients and other patients. Focusing on the “non-differentiation” provision, the court reasoned that “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.” More generally, the court found that the “non-differentiation” provision prohibits plan provisions that―like the Plan’s dialysis provision―have a disparate impact on ESRD patients.
Petitioners argue “that employer group health plans in the Sixth Circuit now run the risk of double damages and loss of tax status if they reimburse dialysis coverage at anything other than the ‘most favored nation’ rate. Under the Sixth Circuit’s decision, all other medical procedures, from childbirth to elder care, must now stand in line behind payment for dialysis treatment.” Petitioners insist that the Medicare Secondary Payer Act “is a coordination-of-benefits measure, designed to protect Medicare.” Yet, it says, the Sixth Circuit majority “transforms the statute [ ] from a coordination-of-benefits law designed to protect Medicare into an anti-discrimination statute designed to protect certain providers.”
[Editor’s note: Some of the language in the background section of the summary above was taken from the petition for writ of certiorari and brief in opposition.]