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Justices Leery of Alleged Kidney Care Bias in Health Plan Fight

March 1, 2022, 8:18 PM

Supreme Court justices seemed skeptical that it’s unlawful for health plans to pay less for dialysis than they do for other treatments if they’re providing all kidney care patients with the same coverage.

Justices Stephen Breyer and Samuel Alito both noted during oral arguments Tuesday that health plans are allowed to set different amounts for different medical conditions and that it’s not considered unlawful discrimination.

“What if they have a certain amount for certain conditions, so they discriminate among different medical conditions and they pay different amounts for different medical conditions,” Alito asked. “How do you compare? Maybe they’re being very stingy with renal dialysis.”

The case is being closely watched by dialysis patients who fear a large portion of providers, that depend on private health plans to stay financially solvent, will close if the court allows plans to encourage patients to switch to Medicare.

The dispute stems from a lawsuit a dialysis provider brought against an Ohio hospital and its employee health plan for allegedly discriminating against patients with end-stage renal disease (ESRD).

DaVita Inc. alleges Marietta Memorial Hospital’s employee health plan is violating the Medicare Secondary Payer Act (MSPA) by treating all dialysis providers as “out-of-network” and reimbursing them at the lowest level rate.

Since nearly all people with end-stage kidney disease qualify for Medicare regardless of age, DaVita argues the plan incentivizes patients to switch to Medicare to avoid paying higher co-pays and deductibles or getting billed for the balance of the care not covered. Foisting dialysis patients on to Medicare is exactly what the MSPA was designed to prohibit, it said.

“Here, there’s no doubt whatsoever that outpatient renal dialysis, the dialysis ESRD patients alone need to survive to the next day for the entire rest of their lives, is treated worse in a number of respects than any other treatment,” DaVita’s attorney Seth Waxman, a partner at Wilmer Cutler Pickering Hale and Dorr LLP, told the justices.

Benefits Not Prescribed

The MSPA requires private health plans that cover dialysis to be the primary payer of those treatments for at least 30 months after a patient is diagnosed with kidney failure. Medicare can be a secondary payer to make up for what a health plan won’t pay starting three months after a diagnosis of ESRD, but the patient would have to pay a monthly fee for those additional benefits.

Under the law, health plans are prohibited from differentiating between the benefits offered to people with ESRD and those offered to people without it, or taking into account the fact that people with kidney failure may be eligible for Medicare.

Marietta Memorial Hospital says it offers the same benefits to all participants regardless of whether they’re eligible for Medicare.

“When Congress requires a specific benefit or parity between benefits, it does so directly,” the hospital’s attorney John Kulewicz, a partner in the Vorys Columbus office, argued in court. “It did not do that here. The Medicare Secondary Payer Act coordinates benefits. It does not prescribe them.”

DaVita’s lawsuit was dismissed by the trial court but later revived by the U.S. Court of Appeals for the Sixth Circuit. The appeals court said a plan can still be engaging in unlawful discrimination against people with ESRD even if it doesn’t explicitly state that these individuals will be treated differently.

But Marietta says that holding transforms the MSPA statute from a coordination-of-benefits law designed to protect Medicare into an anti-discrimination statute designed to protect certain providers.

Government Fisc

Justice Elena Kagan struggled to understand why the government was arguing in support of reversing the Sixth Circuit’s decision. The Justice Department asked to participate in the oral argument to argue that group health plans can uniformly limit dialysis benefits without violating the MSPA.

“What most confuses me about this case is why you’re on this side of it,” she said, eliciting chuckles from her colleagues on the bench. “I hate to state the obvious, but usually the government is concerned about the state of the government finances and aren’t you clearly going to end up paying more if the petitioner wins than if the respondent wins?”

DaVita argues the whole goal of the MSPA is to conserve Medicare’s finances by prohibiting discrimination that would drive ESRD patients off private plans and onto the public program.

Matthew Guarnieri, assistant to the solicitor general at the Justice Department, who participated in Tuesday’s arguments remotely by phone, said the government is simply following the agency’s interpretation of the law.

“The principle that we are here to vindicate, which is that uniform limitations on coverage for renal dialysis do not constitute impermissible differentiation, is a principle that’s reflected in the regulation that CMS, the expert agency charged with administering this statute, has enacted,” he said. “The position we are taking here is the one most consistent with the agency’s longstanding regulation.”

Justice Neil Gorsuch pressed Waxman on what the court should make of the government being on the opposing side of DaVita’s case.

“If the only question is who pays and when, and the beneficiary is the government fisc, why shouldn’t we take into account that the government is on the other side of the v?” he asked. “How do we handle that?”

Justices Amy Coney Barrett and Brett Kavanaugh were quiet for the hour-long argument.

The case is Marietta Mem’l Hosp. Emp. Health Benefit Plan v. DaVita, Inc., U.S., No. 20-1641.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Brent Bierman at bbierman@bloomberglaw.com; Alexis Kramer at akramer@bloomberglaw.com