Supreme Court Overturns Sixth Circuit’s Decision in Case Against DaVita

On Tuesday, the Supreme Court ruled 5-2 that Marietta Memorial Hospital Employee Health Benefit Plan did not violate the Medicare Secondary Payer Statute in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita, Inc. 

According to the opinion authored by Justice Kavanaugh, Marietta is an employer-sponsored group health plan that offers all of its participants the same limited coverage for outpatient dialysis. Further, the opinion states that DaVita is one of the two major dialysis providers in the United States, and provides dialysis to hundreds of thousands of individuals each year, including individuals insured by their employers’ group health plans. 

The opinion states that 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. Further, the statute imposes two specific constraints on group health plans to prevent them from circumnavigating the Statute. First, a plan cannot differentiate the benefits between individuals with end stage renal disease and other individuals on the plan, and second, it cannot take into account an individual’s eligibility for Medicare due to end-stage renal disease.

In 2018, DaVita sued Marietta arguing that its employee health plan’s limited coverage for outpatient dialysis violated both constraints on group health plans under the Medicare Secondary Payer Statute. The district court dismissed DaVita’s claims, concluding that the Plan does not violate either constraint and a divided panel of the U. S. Court of Appeals for the Sixth Circuit reversed. The Court of Appeals ruled that the statute authorized disparate-impact liability, and the Court concluded that the limited payments for dialysis treatment had a disparate impact on individuals with end-stage renal disease.

The Court held that the Marietta Plan did not violate either constraint of the Statute. Further, the court stated that the text of the Statute cannot be read to encompass a disparate-impact theory because the statutory provision simply coordinates payments between group health plans and Medicare and does not dictate any particular level of dialysis coverage. Accordingly, the court reversed and remanded the Court of Appeals decision. 

Justice Kagan filed a dissenting opinion, in which Justice Sotomayor joined, arguing that the majority’s opinion “flies in the face of both common sense and the statutory text.” Specifically, she argued that the Court’s holding, that the Marietta plan does not “differentiate” between individuals with end-stage renal disease and those without because it draws distinctions only between dialysis and other treatments, is flawed because outpatient dialysis is an almost perfect proxy for end-stage renal disease.Thus she argues that the court created a massive and inexplicable workaround to the Medicare Secondary Payer Statute. 

Justice Kagan argues that Congress did not and would not craft a statute permitting such a workaround and thus requiring Congress “to fix a statute this Court has broken.”