The United States Supreme Court (SCOTUS) has been turning long-standing rules on their heads this term. Medicare Secondary Payor (“MSP”) rules have long said that Medicare pays second to a group health plan for the first 30-months of dialysis. Additionally, HIPAA Nondiscrimination rules prohibit discrimination in eligibility or continued eligibility for health plan coverage based on health factors.
On June 21, 2022, SCOTUS released its opinion in the Marietta Memorial Hospital Employee Health Benefit Plan, et al, Petitioners v. Davita Inc., et al. Justice Kavanaugh wrote the majority opinion of the Court, answering the question – whether a group health plan that provides limited benefits for outpatient dialysis—but does so uniformly for all plan participants – violates the MSP rules. Finding in favor of plaintiffs Marietta, the Court stated that this would not violate MSP rules since it applies the limitation to all participants, regardless of End State Renal Disease (ESRD) and Medicare status.
Background
Medicare provides health insurance coverage for those 65 or over or are disabled. Seven years after the origination of Medicare, in 1972, Congress extended Medicare coverage to individuals with end-stage renal disease, regardless of age or disability. However, where employer-sponsored coverage is available, Medicare would pay secondary to the employers’ coverage. Due to the high cost of treatment for ESRD, Congress feared employers would seek to circumvent the secondary payer rule. Two constraints were put on employer-sponsored plans to avoid this problem:
- The 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.” (https://www.law.cornell.edu/uscode/text/42/1395rr#b_14.)
- As relevant here, a plan “may not take into account that an individual is entitled to or eligible for” Medicare due to end-stage renal disease.
Case Details
In the Marietta case, DaVita (a dialysis center) sued the Marietta (hospital) plan arguing that the plan’s limited coverage for outpatient dialysis (1) differentiates between individuals with and without ESRD, and, (2) takes into account Medicare eligibility of individuals with ESRD in violation of the MSP statute. Marietta argued it offers the same terms of coverage for outpatient dialysis to all participants – outpatient dialysis reimbursements are subject to limited reimbursement rates (such as only reimbursing at the Medicare rates, even when paid by the plan).
U.S. Supreme Court Findings
SCOTUS overturned the lower appeals court’s decision that dismissed Davita’s claim because the Marietta plan does not violate the anti-differentiation or take-into-account provisions of MSP statute due to the limited coverage for outpatient dialysis treatments being applied uniformly to all plan participants, and not just Medicare-eligible participants or those with ESRD.
Justice Kavanaugh reiterates the relevant statutory provision: 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.” 42 U. S. C. §1395y(b)(1)(C)(ii).
That statutory language prohibits a plan from differentiating in benefits between individuals with and without ESRD. For example, a group health plan may not single out plan participants with ESRD by imposing higher deductibles on those ESRD participants, or by covering fewer services for them. See 42 CFR §§411.161(b)(2)(i)–(iv). If a plan does not differentiate in the benefits provided to individuals with and without end-stage renal disease, then a plan has not violated that statutory provision, and the differentiation inquiry ends there.
DaVita Argument – DaVita argued that even when plan limits benefits in a uniform way could result in disparate impact on individuals with ESRD.
Kavanaugh Counter to DaVita Argument – that the relevant statutory provision states: 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.” 42 U. S. C. §1395y(b)(1)(C)(ii). That statutory language prohibits a plan from differentiating in benefits between individuals with and without ESRD. For example, a group health plan may not single out plan participants with ESRD by imposing higher deductibles on them, or by covering fewer services for them. See 42 CFR §§411.161(b)(2)(i)–(iv). If a plan does not differentiate in the benefits provided to individuals with and without end-stage renal disease, then a plan has not violated that statutory provision, and the differentiation inquiry ends there. In light of that plain text, it comes as no surprise that the Centers for Medicare and Medicaid Services (CMS) have never adopted a disparate-impact theory in their longstanding regulations implementing this statute.
DaVita’s position would ultimately require group health plans to maintain some (undefined) minimum level of benefits for outpatient dialysis. But this statutory provision simply coordinates payments between group health plans and Medicare. As the Government itself acknowledges, the statute does not dictate any particular level of dialysis coverage by a group health plan.
Marietta Plan Terms in Dispute
Patient A has ESRD which requires dialysis. Patient A’s health benefits plan disadvantages dialysis coverage by:
- Considering all dialysis providers out-of-network.
- Subjecting Patient A to higher copayments, coinsurance amounts, and deductibles.
- Reimbursing dialysis at 87.5% of the Medicare rate instead of paying the “reasonable and customary fee”.
- Subjecting dialysis to heightened scrutiny.
What Does this Ruling Mean for Plans?
Employers sponsoring health plans are permitted to limit the reimbursement rates for outpatient dialysis, regardless of Medicare or ESRD states so long as the terms under the plan are applied uniformly for all participants, regardless of status or reason to receive dialysis. Dialysis has long been a costly treatment provided by dialysis centers who monopolize markets. This ruling now makes clear there is a path for plans to reduce costs for outpatient dialysis.
Considerations/Action Plan
- If making changes to your plan, be aware that your plan documents may need to be modified to reflect any new limitations. Because this is a significant or “material” change, notice to plan participants should occur 60 days prior to the change.
- It is important to consider how to gently communicate the change to plan participants. If employees are not aware of the ability to obtain Medicare coverage if they are in ESRD, make that part of your communication as well to offer additional support.
- Document decision-making whenever making decisions that could be controversial or counter long-standing rules. This will protect the employer from unnecessary scrutiny since the documentation and reasoning is in your records to support the decision to limit outpatient dialysis.
Conclusion
Employers sponsoring health plans are encouraged to work with an insurance consultant, like Leavitt Group; including Webber Advisors and GBS (also Leavitt Group companies) to determine what the terms of your current plan are and how to modify your plan should you choose to impose new limitations on outpatient dialysis. It is important to remember that the key is to apply the same limitations to every plan participant and not one segment or class of participants. Failure to impose terms uniformly would violate HIPAA, the Affordable Care Act and the Medicare Secondary Payer statute.
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Additional Resources
Code of Federal Regulations for ESRD Eligibility where Also Group Health Plan Coverage
Nondiscrimination & Wellness Program Coverage in the Group Market (2009)
End Stage Renal Disease CMS Center
