Every month, the International Foundation releases the Legal and Legislative Reporter, a compilation of new employee benefits-related case summaries. Below is a summary we thought you’d be interested in. Content provided by Morgan, Lewis & Bockius LLP.

The U.S. Supreme Court reverses and remands the Sixth Circuit Court of Appeals decision and finds that the plaintiff hospital health plan did not discriminate against patients with end-stage renal disease (ESRD) by paying less for dialysis than for other treatments because the plan provides the same coverage uniformly for all kidney-care patients.

The plaintiff is an employer-sponsored group health plan. The defendant is a major provider of dialysis services.

The plaintiff plan offers all of its participants the same limited coverage for outpatient dialysis. However, outpatient dialysis services are subject to relatively limited reimbursement rates. The defendant sued the plaintiff in federal district court, arguing that the plan’s limited coverage for outpatient dialysis violated the Medicare Secondary Payer statute. The district court dismissed the defendant’s claims and, after the defendant appealed, the Sixth Circuit Court of Appeals reversed, finding that the Medicare Secondary Payer statute authorized disparate-impact liability and that the limited payments for dialysis treatment had a disparate impact on individuals with ESRD. The plaintiff petitioned to this court and the court granted certiorari.

Medicare provides health insurance coverage for those who are 65 or over or are disabled. In 1972, Congress extended Medicare coverage to individuals with ESRD, regardless of age or disability. The Medicare Secondary Payer statute makes Medicare a secondary payer to an individual’s existing insurance plan for certain medical services, including dialysis, when that plan already covers the same services. To prevent plans from circumventing their primary payer obligation for ESRD treatment, the statute imposes two constraints: (1) a plan may not differentiate in the benefits it provides between individuals having ESRD and other individuals covered by such plan on the basis of the existence of ESRD, the need for renal dialysis or in any other manner, and (2) a plan may not take into account that an individual is entitled to or eligible for Medicare due to ESRD.

While the Medicare Secondary Payer statute prohibits a plan from differentiating benefits between individuals with and without ESRD, the court looks at the plan and notes that its terms apply uniformly to individuals with and without ESRD. There is nothing in the plan that differentiates the benefits it provides to individuals with ESRD and those without.

The defendant argues that the Medicare Secondary Payer statute imposes liability on a plan even when that plan limits benefits in a uniform way if the limitation on benefits has a disparate impact on individuals with ESRD. The court disagrees and notes that it cannot read the statute in that way to encompass a disparate-impact theory. Nothing in the statute mandates the level of dialysis coverage that must be provided under an employer group health plan; instead, the statute requires coordination of payments between a group health plan and Medicare.

In addition, the court looks at the plan terms and finds that the plan provides the same outpatient dialysis benefits to all plan participants, regardless of whether a participant is entitled to or eligible for Medicare. Therefore, based on that, the plan cannot be said to take into account whether its participants are entitled to or eligible for Medicare.

Consequently, the court finds that the Medicare Secondary Payer statute does not authorize disparate-impact liability, and the plan’s coverage terms for outpatient dialysis do not violate the statute because those terms apply uniformly to all covered individuals.

Accordingly, the court reverses and remands the Sixth Circuit Court of Appeals decision.

Content provided by Morgan, Lewis & Bockius LLP.

Marietta Memorial Hospital Employee Health Benefit Plan et al. v. DaVita, Inc., et al., No. 20-1641 (U.S., June 21, 2022).  

@ 2022 International Foundation of Employee Benefit Plans, Inc. All rights reserved.

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