US Supreme Court Determines Health Plan Limited Dialysis Benefit Did Not Violate Medicare Secondary Payer Act

DaVita, one of the nation’s largest dialysis providers, sued Marietta Memorial Hospital over its limited dialysis coverage.  The plan offered no in-network dialysis care and limited out-of-network reimbursements to a low rate that DaVita contends results in high enough member cost sharing and balance billing to ultimately steer patients to drop the coverage in favor of Medicare.  Patients moving to Medicare results in the dialysis provider being paid lower rates with no ability to balance bill the patient.

Note that individuals with end stage renal disease (ESRD) typically qualify for Medicare relatively quickly, the first day of their fourth month on dialysis.

With respect to ESRD, the Medicare Secondary Payer Act (MSP) stipulates two major plan requirements:

1. 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”
2. A plan “may not take into account that an individual is entitled to or eligible for” Medicare due to end-stage renal disease

The District Court had dismissed DaVita’s claims, but a divided panel of the Sixth Circuit Court of Appeals reversed, ruling that the net effect of the limitations had a “disparate impact” on individuals with ESRD.

However, the Supreme Court of the United States (SCOTUS) ruled 7-2 against DaVita’s claim, saying the health plan did not violate MSP as the law “does not authorize disparate-impact liability, and the Marietta Plan’s coverage terms for outpatient dialysis do not violate [MSP] because those terms apply uniformly to all covered individuals…whether or not a participant is entitled to or eligible for Medicare.”

SCOTUS commented that “the statute does not dictate any particular level of dialysis coverage” and it would not be possible for the courts to “determine the level of benefits that qualifies as adequate.”

The high court concludes that at this time, Congress has not enacted a specific level of dialysis care requirements in health plans, so the employer’s limitations are currently permissible.  However, they also warned that Congress could impose some minimum dialysis coverage requirements anytime.

This lawsuit highlights a trend of health care providers cracking down on subpar plan payments, and Congress has been taking notice when it imposes a significant enough impact on the public health and welfare.

• For over a decade, requirements under the Mental Health Parity and Addiction Equity Act (MHPAEA) have put plans under a microscope to ensure they are not unfairly targeting/restricting mental health or substance use coverage or providers in comparison with their medical/surgical counterparts.
• New this year, the No Surprises Act imposes strict rules on determining adequate payment levels for emergency room care, air ambulance services, and out-of-network providers involved in treating patients at in-network hospitals and ambulatory surgical facilities.
• Now SCOTUS has just informed Congress in direct verbiage that this could be another area ripe for legislation should they choose to amend MSP with further protections.