981 F.3d 679
9th Cir.2020Background:
- Virginia Mason Memorial Hospital administers an ERISA group health plan that pays for dialysis; the plan pays a special ESRD rate (125% of Medicare) once a member becomes or is eligible for Medicare for ESRD.
- Under Medicare law, persons with ESRD become eligible for Medicare after three months of dialysis; for the following 30 months a group health plan may not "take into account" Medicare eligibility (Medicare-as-Secondary-Payer, MSP).
- DaVita provided dialysis to a Plan beneficiary ("Patient 1"); after month 3 the Plan reduced provider reimbursement based on Patient 1’s Medicare eligibility and paid that lower ESRD rate for 20 months.
- DaVita sued under the MSP private cause of action, 42 U.S.C. § 1395y(b)(3)(A), alleging the Plan impermissibly took Medicare eligibility into account during the 30-month coordination period.
- The district court dismissed, holding the private cause of action is available only when Medicare has made a payment; the Ninth Circuit reversed in part, holding Medicare payment is not a prerequisite to private suit and vacating dismissal for the 20-month period.
- The Ninth Circuit affirmed dismissal for the subsequent 10 months after Patient 1 left the Plan because DaVita failed to plausibly allege that the Plan’s reduced payments caused Patient 1 to drop coverage.
Issues:
| Issue | DaVita's Argument | Virginia Mason's Argument | Held |
|---|---|---|---|
| Whether § 1395y(b)(3)(A) requires Medicare to have paid before a private MSP suit may be brought | § 1395y(b)(3)(A) authorizes suit whenever a primary plan fails to provide primary payment; no Medicare-payment prerequisite in the text | The reference to paragraph (2)(A) implies Medicare must have made (or triggered) a conditional payment before suit | Held: No Medicare payment prerequisite; private cause of action covers plan payments that violate paragraph (1) or subparagraph (2)(A) even if Medicare never paid |
| Scope of a plan’s MSP obligation the private cause of action enforces | The cause of action reaches payments that take Medicare eligibility into account too early (violating §1395y(b)(1)(C)) | Limiting suits to situations where Medicare paid aligns with MSP’s fiscal-protection purpose | Held: Text, purpose, and regulations support enforcement of equal-treatment provisions as well as fiscal protection; suits need not await Medicare payment |
| Whether a plan must violate both paragraph (1) and (2)(A) to trigger suit | A failure to comply with either paragraph (1) or (2)(A) suffices to bring a claim | The statute requires failure to comply with both, effectively requiring Medicare payment | Held: A plan fails if it violates either requirement; De Morgan’s-law reading supports suit when either is breached |
| Causation for damages after patient left the Plan | DaVita: reduced payments led Patient 1 to drop Plan, producing damages for later months | Virginia Mason: Plaintiff pleads no plausible causal link between reduced provider payments and Patient 1’s dropping coverage | Held: Dismissal affirmed for post-termination months — complaint fails to plausibly allege causation |
Key Cases Cited
- Daewoo Elecs. Am., Inc. v. Opta Corp., 875 F.3d 1241 (9th Cir. 2017) (standard of review — de novo review and accepting complaint allegations as true)
- Parra v. PacifiCare of Ariz., Inc., 715 F.3d 1146 (9th Cir. 2013) (interpreting §1395y(b)(2)(A) as designating Medicare as secondary payer)
- Bio-Medical Applications of Tenn., Inc. v. Central States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d 277 (6th Cir. 2011) (discussing scope of private cause of action; reached different conclusion on Medicare-payment prerequisite)
- DaVita, Inc. v. Marietta Mem'l Hosp. Empl. Health Benefit Plan, 978 F.3d 326 (6th Cir. 2020) (contrary Sixth Circuit reading that requires a Medicare-triggering failure)
- Humana Med. Plan v. W. Heritage Ins. Co., 832 F.3d 1229 (11th Cir. 2016) (describing MSP as presupposing existing payment obligations and analyzing private-plan obligations)
- Mason v. Am. Tobacco Co., 346 F.3d 36 (2d Cir. 2003) (describing paragraph (2) as making Medicare the secondary payer)
- Maslenjak v. United States, 137 S. Ct. 1918 (2017) (principle: begin statutory interpretation with the text)