DaVita, Inc. v. Marietta Mem. Hosp.DaVita, Inc. v. Marietta Mem. Hosp.
Case Information
*1 Before: MOORE, CLAY, and MURPHY, Circuit Judges.
_________________
COUNSEL ARGUED: Bobby R. Burchfield, KING & SPALDING LLP, Washington, D.C., for Appellants. William H. Prophater, Jr., NEWHOUSE, PROPHATER, KOLMAN & HOGAN, LLC, Columbus, Ohio, for Marietta Memorial Appellees. Rodney A. Holaday, VORYS, SATER, SEYMOUR AND PEASE LLP, Columbus, Ohio, for Appellee Medical Benefits Mutual Life Insurance Co. ON BRIEF: Bobby R. Burchfield, KING & SPALDING LLP, Washington, D.C., for Appellants. William H. Prophater, Jr., D. Wesley Newhouse, NEWHOUSE, PROPHATER, KOLMAN & HOGAN, LLC, Columbus, Ohio, for Marietta Memorial Appellees. Rodney A. Holaday, VORYS, SATER, SEYMOUR AND PEASE LLP, Columbus, Ohio, Brent D. Craft, VORYS, SATER, SEYMOUR AND PEASE LLP, Cincinnati, Ohio, for Appellee Medical Mutual Benefits Mutual Life Insurance Co. Deanna J. Reichel, Ryan V. Petty, FISH & RICHARDSON P.C., Minneapolis, Minnesota, Mary L. Stoll, STOLL LAW GROUP, PLLC, Seattle, Washington, John R. Christiansen, CHRISTIANSEN IT LAW, Olympia, Washington, for Amici Curiae.
MOORE, J. (pp. 2–33; app. 34–38), delivered the opinion of the court in which CLAY, J., joined. MURPHY, J. (pp. 39–55), delivered a separate opinion concurring in the judgment in part and dissenting in part.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. Plaintiff DaVita, Inc. and its subsidiary, DVA Renal Healthcare, Inc., appeal the district court’s dismissal of their lawsuit alleging various violations of the Medicare Secondary Payer Act and the Employee Retirement Income Security Act of 1974 by an employee health benefit plan and its administrators. According to DaVita, the plan unlawfully treated a plan participant and DaVita patient—known as Patient A in this lawsuit—differently because this patient suffers from end-stage renal disease. In particular, the plan allegedly targeted renal dialysis services, which DaVita provides to Patient A, with poor reimbursement rates, in the hopes that dialysis patients like Patient A would switch to Medicare, which they are legally entitled to do three months after being diagnosed with the disease. Upon the defendants’ motions to dismiss, the district court dismissed all of DaVita’s claims with prejudice, and DaVita appealed. For the following reasons, we are persuaded that, as to Counts I, II, and VII of its complaint, DaVita has plausibly alleged that the defendants have engaged in unlawful discrimination. As to the rest of its claims, DaVita lacks a sufficient interest to prosecute them. Accordingly, we AFFIRM in part, REVERSE in part, and REMAND for discovery and further proceedings on Counts I, II, and VII of DaVita’s complaint.
I. BACKGROUND [1]
Plaintiff DaVita, and its subsidiary, Plaintiff DVA Renal Healthcare, Inc., are leading providers of dialysis treatment in the United States. R. 1 (Compl. ¶¶ 11–12) (Page ID #5). Since April 15, 2017, DaVita has provided dialysis treatment to Patient A, an anonymous individual diagnosed with end-stage renal disease (“ESRD”). Id. ¶¶ 19, 29 (Page ID #6–7, 10). Before Patient A began receiving treatment, the patient signed an “Assignment of Benefits” form that assigned their rights under the insurance plan to DaVita. Id. ¶ 31 (Page ID #10). Between April 15, 2017, and August 31, 2018, the costs of Patient A’s dialysis sessions were reimbursed by their health benefit plan, Defendant Marietta Memorial Hospital Employee Health Benefit Plan (the “Plan”), a self-funded plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Id. ¶¶ 13, 29 (Page ID #5, 10). The Plan is funded and administered by Defendant Marietta Memorial Hospital, and its benefit manager is Defendant Medical Benefits Mutual Life Insurance Co. (“MedBen”). Id. ¶¶ 14–15 (Page ID #5).
The Plan provides three tiers of reimbursement benefits, and during the period that Patient A was a member of the Plan, the Plan reimbursed DaVita for the patient’s dialysis costs at the bottom tier, Tier 3. Id. ¶ 24 (Page ID #8). This bottom tier applied to providers, like DaVita, who are “out-of-network.” Id. DaVita was not alone as a bottom-tier dialysis provider—under the Plan’s terms, all dialysis providers are considered out-of-network and are thus subject to lower reimbursement amounts than providers in Tier 1 and Tier 2 are. Id. ¶ 25 (Page ID #8). In addition to this categorically lower reimbursement level, dialysis providers like DaVita are subject to a further, unique limitation. Whereas most out-of-network providers are reimbursed in the bottom tier based on a “reasonable and customary” fee as the term is understood in the healthcare industry, dialysis providers are subject to an “alternative basis for payment.” Id. ¶ 27 (Page ID #9). Specifically, reimbursement for dialysis providers “will not exceed the maximum payable amount applicable . . . which is typically one hundred twenty-five percent (125%) of the current Medicare allowable fee.” (quoting Compl. Ex. A at 17). Finally, for the dialysis service itself, the Plan reimburses at a rate of 70% of the 125% of the Medicare allowable fee—in other words, 87.5% of the Medicare rate, see Appellant Br. at 20—a fee which is already lower than the industry-wide definition of a “reasonable and customary” fee. R. 1 (Compl. ¶ 28) (Page ID #9–10). For these reasons, DaVita was reimbursed at a relatively lower rate both compared to in-network providers and to other out-of-network providers.
DaVita was not the only entity that allegedly suffered due to the Plan’s differential
treatment of dialysis reimbursement. During the time that Patient A was covered by the Plan, the
patient had no in-network options for dialysis services, exposing them to higher copayments,
coinsurance amounts, and deductibles.
Id.
¶ 48 (Page ID #16–17). Patient A was allegedly at
risk of DaVita billing them for the balance of what the Plan had not reimbursed DaVita.
Id.
¶ 35
(Page ID #11–12). The Plan also identified dialysis as subject to heightened scrutiny, such as
“cost containment review” and “claim audit and/or review,” which allegedly incentivizes dialysis
patients to abandon the Plan and switch to Medicare.
Id.
¶ 51 (Page ID #18). On August 31,
2018, Patient A dropped the Plan as a primary insurance provider and switched to Medicare, to
which they were entitled by virtue of having ESRD.
Id.
¶ 29 (Page ID #10);
see
On December 19, 2018, DaVita filed a complaint against the defendants, alleging that the Plan treats dialysis providers differently from other medical providers in violation of the Medicare Secondary Payer Act (“MSPA”) and ERISA. R. 1 (Compl. at 1) (Page ID #1). The complaint is brought on DaVita’s behalf and on behalf of Patient A. Id. ¶ 10 (Page ID #4). The crux of DaVita’s complaint is that by offering inferior benefits to individuals with ESRD, the Plan unlawfully incentivized such individuals, like Patient A, to drop the Plan as their health insurer and go on Medicare. Id. ¶ 6, 50 (Page ID #3, 17–18). On February 14, 2019, Marietta Memorial Hospital and the Plan moved to dismiss DaVita’s complaint, R. 17 (Marietta Mot. to Dismiss at 1) (Page ID #182), and on the next day, MedBen did the same, R. 18 (MedBen Mot. to Dismiss at 1) (Page ID #192).
On September 20, 2019, the district court granted the defendants’ motions to dismiss in a
written opinion and order, dismissing all of DaVita’s counts with prejudice.
See DaVita, Inc. v.
Marietta Mem’l Hosp. Emp. Health Benefit Plan
, No. 2:18-CV-1739,
II. STANDARD OF REVIEW
We review de novo the district court’s grant of a motion to dismiss.
Milligan v. United
States
,
III. DISCUSSION
A. The Private Cause of Action
DaVita’s complaint first alleges a violation of the MSPA through the Act’s private cause of action. The defendants argue that a Medicare conditional payment is required before a party can sue under this cause of action and that, in this case, Medicare was not allegedly forced to make a conditional payment to cover the Plan’s obligations. We agree with the first proposition and disagree with the second. Although the plain text of the private-cause-of-action provision requires Medicare to make a conditional payment before the cause of action is available, Medicare allegedly made such a payment in this case. In order to explain why, a brief background on the statutory framework is necessary. [3]
1. Statutory Background
In 1972, Congress extended Medicare coverage to nearly all individuals with ESRD.
See
Pub. L. No. 92–603, § 299I, 86 Stat. 1429, 1463–64 (1972). This meant that Medicare served as
the primary payer of health costs for such individuals, as well as the many other individuals
eligible for Medicare. Amid rising healthcare costs, in 1980, Congress began its effort to
counteract escalating Medicare costs by enacting the MSPA, which initially focused on getting
private health insurance plans to help cover costs that Medicare had been paying out for
automobile accidents.
[4]
See United States v. Baxter Int’l, Inc.
, 345 F.3d 866, 889 (11th Cir.
2003). In enacting the MSPA, Congress determined that Medicare would have secondary rather
than primary liability for accident-injury healthcare costs incurred by a Medicare-eligible
individual who had automobile insurance that covered these costs.
See
H.R. R EP . No. 96–1167,
at 389 (1980). Thus, if a certain individual was eligible for Medicare but had private insurance,
Medicare would serve not as the primary payer but as the secondary payer (i.e., the backup
payer) in case the private insurer did not pay.
See Stalley v. Methodist Healthcare
,
In the Omnibus Reconciliation Act of 1981 (“1981 OBRA”), Congress amended the
MSPA to cover individuals with ESRD who are on private health insurance.
See
Omnibus
Budget Reconciliation Act of 1981, Pub. L. No. 97-35, § 2146 (1981). With this amendment, an
individual’s private insurer—such as an employer-funded health plan, like the Plan in this case—
was required to pay for a patient’s dialysis treatment for a period of twelve months
[5]
, after which
Medicare would take over and become the primary payer for these treatments. The Senate
Report for the 1981 OBRA explained that before the amendment, “most health plans . . .
contain[ed] provisions that [we]re intended to prevent payment of benefits where the insured
[wa]s also entitled to benefits as a result of coverage under a program such as [M]edicare.”
S. R EP . 97-139, at 735 (1981). The amended Act prohibited this. It denied a health plan’s tax
deduction “if the plan differentiates in the benefits it provides between individuals having
[ESRD] and other individuals covered by such plan on the basis of the existence of [ESRD], the
need for renal dialysis, or in any other manner.” Pub. L. No. 97-35, § 2146(b). As we have
observed, “[i]t would appear that the precise problem that Congress sought to ameliorate was
that private plans would provide inferior benefits or coverage for medical treatment that also was
covered by Medicare.”
Bio-Med. Applications of Tenn., Inc. v. Cent. States Se. & Sw. Areas
Health & Welfare Fund
,
The resulting statute, after several decades of amendments, thus prevents a “group health plan” from taking two actions with respect to an individual diagnosed with ESRD:
A group health plan . . . —
(i) may not take into account that an individual is entitled to or eligible for [Medicare benefits due to ESRD] during the [30]-month period which begins with the first month in which the individual becomes entitled to benefits . . . ; and
(ii) 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[.]
The MSPA has two internal enforcement mechanisms. The first is the government- enforcement provision, which reads:
In order to recover payment made under this subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan.
There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).
2. Availability of the Private Cause of Action When Medicare Has Not Made a Conditional Payment
The defendants argue that, based in part on the above language from Bio-Medical , DaVita is prohibited from suing under the private cause of action because Medicare did not make a conditional payment in this case. DaVita essentially has three responses. First, Bio-Medical does not hold that a payment by Medicare is a precondition to suing under the private cause of action. Second, the text and purpose of the MSPA counsel against requiring this as a precondition. Third, even if payment by Medicare were required, DaVita’s complaint satisfies this requirement because the Plan induced Patient A to enroll in Medicare, which led to Medicare making payments for Patient A’s dialysis before the relevant thirty-month period was over. We hold as follows: (1) Bio-Medical did not hold that a precondition was required, (2) but our independent review of the statutes confirms that it is; (3) however, Medicare’s payment in this case was conditional, and thus the private cause of action is available to DaVita.
a. Bio-Medical does not control this case Bio-Medical ’s thoughtful discussion on the availability of the private cause of action was not necessary to its decision. In Bio-Medical , the panel was faced with a straightforward case of a primary plan’s terminating coverage and Medicare’s stepping in to cover the primary plan’s obligations. The primary plan had completely ceased payments to the dialysis provider upon learning that the relevant patient was eligible for Medicare, even though the patient was still a member of the plan. Id. at 280. Given that the primary plan was failing to meet its payment obligations under the MSPA, the dialysis provider turned to Medicare, which began making payments to enable the patient to continue to receive treatment. Id. Thus, the question before the panel was not whether Medicare payments were a precondition for suit under the private cause of action, but whether this cause of action could be used if the primary plan’s payment had not been previously “demonstrated,” such as by a judgment or settlement. Id. at 279.
Despite the clarity of
Bio-Medical
’s language regarding Medicare “step[ping] in and
(temporarily) foot[ing] the bill,” this statement was not necessary to its decision. Instead, this
statement is a clear example of dicta.
See
Black’s Law Dictionary (11th ed. 2019) (defining
obiter dictum as “[a] judicial comment made while delivering a judicial opinion, but one that is
unnecessary to the decision in the case and therefore not precedential”). This is not a case in
which one panel has issued a clear holding on an issue and a litigant in a subsequent case is
bound by that holding despite presenting a novel argument that the prior panel did not actively
consider in issuing its holding.
See, e.g.
,
Grundy Mining Co. v. Flynn
,
b. The MSPA’s private-cause-of-action provision requires a conditional payment by Medicare
Although
Bio-Medical
does not dictate the outcome in this case, we conclude that the
MSPA does require a conditional payment by Medicare before a planholder (or a planholder’s
assignee) may sue under the private cause of action. Beginning with the text of the provision,
the question is what it means for a primary plan to “fail to provide for primary payment (or
appropriate reimbursement) in accordance with paragraphs (1) and (2)(A),”
In our view, the only way that a primary plan can fail to act in accordance with this provision is by failing to make payments or appropriate reimbursements to a provider and thus triggering the remission of a conditional payment by Medicare. We thus make a holding of our observation in Bio-Medical : “[A] primary plan is liable under the private cause of action when it liability question, this Court decided only that the payment by Medicare in that case was sufficient to allow the private suit, not that a payment by Medicare was necessary in all circumstances.”).
discriminates against planholders on the basis of their Medicare eligibility and therefore causes
Medicare to step in and (temporarily) foot the bill.” 656 F.3d at 286. When we “consider
paragraphs (1) and (2)(A) collectively, rather than individually,” discriminating against a
planholder in violation of paragraph (1) is what sets in motion the conditional-payment
mechanism set forth in paragraph (2). And conditional payment is the only type of payment
permitted under paragraph (2)(A). Thus, the only way that a primary plan fails to act in
accordance with paragraph (2)(A)—or, in other words, the only way it sets paragraph (2)(A)’s
payment mechanism in motion—is by triggering Medicare to make a conditional payment. It is
true that, unlike the government-enforcement provision, which explicitly states that enforcement
actions may be taken “to recover payment made,”
An alternative reading of the private-cause-of-action provision—one that, we note, no party has raised—is that the provision requires the showing of a Medicare payment, but not a conditional Medicare payment, as a precondition to suit. Under this theory, a plan would fail to pay (or appropriately reimburse) in accordance with paragraph (2)(A) when it forces Medicare to break with the paragraph’s general prohibition on payments other than conditional ones. That is, because paragraph (2)(A) contemplates only conditional payments, a plan that induced Medicare to make a payment outside what the statute has contemplated would contravene paragraph (2)(A). The problem with this interpretation, however, is that, per the plain text of paragraph (2), the only type of payment that Medicare is capable of making as a secondary payer is a conditional one. Conditional payments are not simply the kinds of payments Medicare may make under certain circumstances; they are the only kind of payments that Medicare can make as a secondary payer. Put another way, Medicare stepping in to make a payment when a plan has failed to do so is, by definition, conditional on the plan ultimately repaying it. The premise of the alternative reading—that Medicare can be forced into making payments that exceed the scope of its statutory authority—finds no support in the text. Thus, to act in contravention of paragraphs (1) and (2)(A) is to violate the first and set in motion the conditional-payment mechanism of the second.
Resisting this conclusion, Amicus Dialysis Patient Citizens (“DPC”) maintains that we
should focus on the disjunctive nature of “primary payment (
or
appropriate reimbursement)” in
the private-cause-of-action provision.
c. DaVita has plausibly alleged that Medicare made a conditional payment
DaVita suggests that the conclusion we have laid out above will make it impossible for private actors to sue for discrimination. According to DaVita, the MSPA’s extremely high threshold for allowing Medicare to make a conditional payment—barring payment unless the primary plan “has not made or cannot reasonably be expected to make” a payment—makes conditional payments exceedingly rare. If we were to conceive of conditional payments as narrowly as DaVita suggests, DaVita would undoubtedly be correct that a “perverse result” would ensue. Reply Br. at 5. Indeed, a narrow understanding of conditional payments would permit precisely the type of discrimination that the MSPA prohibits. This is a result that neither the text nor purpose of the MSPA can bear. Taking the allegations in DaVita’s complaint to be true, Medicare has allegedly made a conditional payment in this case. [7]
Our task is to determine when Medicare can make conditional payments. The
“[a]uthority to make conditional payment” section of the MSPA provides that “[t]he Secretary
may make payment under this subchapter with respect to an item or service if a primary plan . . .
has not made or cannot reasonably be expected to make payment with respect to such item or
service promptly.”
Instead, we construe the conditional-payment requirement in light of its neighboring
provisions, which prohibit a plan from “tak[ing] into account” an individual’s Medicare
entitlement or discriminating against an individual for having ESRD.
This is not to say that anytime Medicare remits payment to a provider, the provider or
planholder will have a private cause of action under the MSPA. Medicare makes payments to
providers all the time that are plainly not “conditional payments.” For example, Medicare serves
as the primary payer for individuals who do not have private health insurance at all, and thus
makes regular payments on their behalf to providers.
See
We acknowledge that one implementing regulation appears to prevent conditional
payment by Medicare when a plan is engaged in discriminatory underpayment.
See
Appellant
Br. at 30, Reply Br. at 5. Section 411.165 of the Code of Federal Regulations provides that
Medicare “does not make conditional primary payments” when a “[group health] plan denies a
claim in whole or in part” because the “plan limits its payments when the individual is entitled to
Medicare.”
In our view, this regulation’s interpretation of conditional payment and the surrounding
statutory framework conflicts both with the text of the MSPA and other implementing
regulations.
See
Permitting suit under the private cause of action in this situation, when Medicare
allegedly began paying before it should have, also comports with the double-damages nature of
the private cause of action.
See
For the foregoing reasons, we conclude that the district court erred in dismissing Count I of DaVita’s complaint. We hold that a conditional payment by Medicare is required as a precondition to suing under the MSPA’s private cause of action and that the complaint contains sufficient allegations of such a payment for DaVita to proceed further with Count I.
B. The Assignment of Benefits
Aside from Count I, the remainder of DaVita’s complaint alleges violations of ERISA.
Before assessing the merits of these claims, we must answer a threshold question: May DaVita
raise these claims through its status as an assignee of Patient A?
[8]
The district court answered
“no” as to Counts III through VI and did not address the issue as to Counts II and VII.
See DaVita
,
The putative basis for DaVita’s right to bring the six ERISA claims is the Assignment of Benefits form that Patient A signed prior to receiving treatment from DaVita. The form reads:
I hereby assign to Facility and DaVita all of my right, title and interest in any
cause of action and/or any payment due to me (or my estate) under any employee
benefit plan, insurance plan, union trust fund, or similar plan (‘Plan’), under
which I am a participant or beneficiary, for services, drugs or supplies provided
by Facility to me or my dependents for purposes of creating an assignment of
benefits under ERISA or any other applicable law. I also hereby designate
DaVita as a beneficiary under any such Plan and instruct that any payment be
made solely to and sent directly to DaVita. If I receive any payment directly from
any Plan for services, drugs or supplies provided to me by DaVita, including
insurance checks, I recognize that such payment sent directly to me was
to be redressed by a favorable judicial decision.”
Spokeo, Inc. v. Robins
,
[9] But see supra note 2.
[10] For Count III, only Marietta is named as a defendant. See R. 1 (Compl. ¶¶ 71–73) (Page ID #24–25). inappropriate and I agree to immediately endorse and forward such payment to DaVita.
R. 1 (Compl. ¶ 31) (Page ID #10–11). This form clearly confers a right on DaVita to bring
Count II, and the defendants do not argue otherwise.
[11]
Count II is a claim for unpaid benefits,
inter alia
, under
As to Counts III through VI, by contrast, we conclude that DaVita lacks an assigned right
or interest in them. DaVita raises these four breach-of-fiduciary-duty claims under
§ 1104(a)(1)(B) and quotes the assignment selectively to argue that “Patient A assigned ‘any illegally discriminate against those with ESRD.
See Hill v. Blue Cross & Blue Shield of Mich.
,
Perhaps the concurrence is concerned that DaVita explicitly cited only to
The concurrence adds that it “does not see” how DaVita can “fix this problem” by relying on
Here, DaVita does not merely allege that it should be reimbursed more for providing dialysis services
because the Plan violates the MSPA; DaVita also complains that the Plan’s “singl[ing] out dialysis services for
further reimbursement limitations[,]” R. 1 (Compl. ¶ 27) (Page ID #9),
violates other terms of the Plan
that
reimburse other in-network or out-of-network services at higher rates.
Cf. Star Dialysis
,
To the extent that DaVita asks the district court to reform the Plan to extend its in-network reimbursement
rates to dialysis providers or to reimburse dialysis services based on the “reasonable and customary” fee that the
Plan uses to reimburse every other out-of-network service,
id.
¶ 52 (Page ID #18), DaVita seeks appropriate
equitable relief to enforce the terms of the Plan per
cause of action’ to DaVita, under ‘ERISA or any other applicable law.’” Appellant Br. at 59. It may not be immediately apparent from the Assignment of Benefits form that Patient A successfully assigned to DaVita their right to seek legal and equitable relief as to unpaid benefits per Count II but failed to assign their right to challenge Defendants’ fiduciary duties per Counts III–VI. But a close examination of the form’s textual jungle reveals the difference. As highlighted above, the form stresses Patient A’s transferring their rights as a beneficiary . The form links “any cause of action” and “any payment due” to the patient’s status as a “ beneficiary ” and to the patient’s “creating an assignment of benefits under ERISA.” Thus, Patient A did not assign “any cause of action under ERISA or any other applicable law” for any purpose whatsoever; rather this patient assigned causes of action brought to recover benefits. See DaVita, Inc. v. Amy’s Kitchen, Inc. , 379 F. Supp. 3d 960, 970 (N.D. Cal. 2019) (examining similar language and concluding that it “suggests that, at most, Patient 1 transferred to DaVita the right to bring suit for payment of benefits, rather than for ‘any cause of action’ whatsoever”). Further, the policy stipulates that Patient A “designate[s] DaVita as a beneficiary under [the] Plan”; nowhere does the form explicitly designate DaVita as an inheritor of Patient A’s fiduciary relationship with Defendants.
DaVita protests that “[i]f the parties intended only for Patient A to assign some causes of action, DaVita and Patient A could have said so,” Appellant Br. at 59–60, but the entirety of the assignment, as discussed, shows that they did. Moreover, the title of the assignment is “Assignment of Benefits,” which informs the issue of the assignment’s scope. DaVita’s final argument is that there must be a distinction between “any cause of action” and “any payment due,” and linking the “any cause of action” language to the recoupment of benefits renders it surplusage. See Appellant Br. at 61; Reply Br. at 29. But “any cause of action” could mean something different from “any payment due” without interpreting the former phrase to mean “any cause of action under any existing law.” For instance, the assignment could mean that DaVita is the assignee of both Patient A’s interest in lawsuits related to payments as well as Patient A’s receipt of payments outside the context of litigation.
As to Count VII, Defendants Marietta and the Plan—the only parties named as
defendants for this claim,
see
R. 1 (Compl. ¶¶ 91–94) (Page ID #29)—have forfeited any
argument that the assignment does not allow DaVita to bring this claim as an assignee.
[13]
And
unlike Article III standing, this issue is waivable. “Article III ‘standing . . . is jurisdictional and
not subject to waiver.’”
LPP Mortg., Ltd. v. Brinley
,
We reject the concurrence’s overly formalistic and novel textual challenge that
§ 1182(a)(1) “applies to a plan’s rules of
eligibility
, not to its rules concerning
covered benefits
.”
Concurring Op. at 54. Section 1182(a)(1) covers “rules for eligibility (including continued
eligibility) of any individual to enroll under the terms of the plan based on . . . health status-
related factors[,]” including a person’s “[m]edical condition[.]”
A superficial glance at
C. MSPA Discrimination
Arriving to the merits of Counts II and VII, the basic question is whether the MSPA
prohibits primary plans from discriminating against individuals with ESRD without expressly
stating that these individuals will be treated differently. If the answer is yes, then DaVita has
plausibly alleged two ERISA violations. First, if the defendants discriminated against Patient A
in violation of federal law (i.e., the MSPA), then DaVita, as Patient A’s assignee, is entitled to
unpaid benefits under ERISA flowing from this violation.
See
We hold that the MSPA’s antidiscrimination provisions prohibit conduct beyond the express differential treatment of individuals with ESRD. First, as to the non-differentiation provision of the MSPA, its plain text prohibits both express anti-ESRD discrimination based on an individual’s ESRD status and indirect anti-ESRD discrimination based on an individual’s ESRD-specific need for renal dialysis or based on any other factor. Second, as to the take-into- account provision, the meaning of “take into account” is ambiguous, but the relevant regulations support DaVita’s theory of discrimination for the same reasons that it states a violation of the non-differentiation provision. In short, a plan may be engaging in unlawful discrimination against individuals with ESRD even if it does not explicitly single these individuals out for differential treatment.
1. The Non-Differentiation Provision
Paragraph (1)(C)(ii) of the MSPA states that a group health 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.”
The second and third types of anti-ESRD discrimination are at issue here. The second is the differential treatment of ESRD patients based on their “need for renal dialysis.” As DaVita explains, “need” includes these patients’ need for the treatment compared to those who do not need it at all, and their need compared to those who do need it, just to a lesser degree. First, DaVita plausibly alleges that dialysis is “needed almost exclusively by ESRD patients.” Appellant Br. at 41. That is, in a pie chart of dialysis-users, ESRD-diagnosed individuals would take up almost the full pie. See R. 1 (Compl. ¶ 20) (Page ID #7) (“[N]early all enrollees of the Plan who require or will require dialysis are individuals with ESRD who need such treatment to sustain life.”). Moreover, DaVita explains—without objection by the defendants—that individuals with ESRD “need” dialysis with far greater frequency than the rare, non-ESRD users of dialysis do. Compare Appellant Br. at 8 (“[T]he majority of ESRD patients rely on regular dialysis treatments from the time they are diagnosed with ESRD for the rest of their lives.”), with Reply Br. at 14 n.5 (“The few dialysis patients who do not have ESRD typically suffer from acute kidney injury (‘AKI’) and require dialysis for, at most, a period of weeks (as opposed to years).”). The defendants do not counter with their own explanation of what the “need for renal dialysis” means.
The third prohibited basis of anti-ESRD discrimination is the differential treatment of ESRD patients “in any other manner” not covered by the prior two bases. That is, besides engaging in anti-ESRD discrimination by explicitly carving out a different set of benefits for those with ESRD or by targeting these individuals based on their more common and/or frequent need for renal dialysis, a primary plan may not engage in such discrimination through any other means. In DaVita’s view, “[t]he catch-all phrase ‘or in any other manner’ cautions plans against creative devices that have the effect of such illegal differentiation.” Appellant Br. at 42. Again, the defendants offer no competing definition for this type of prohibited discrimination.
Both of these bases support DaVita’s theory of how the Plan discriminated against Patient A in violation of the MSPA and ERISA. As to the second basis, DaVita has plausibly alleged that a principal, distinguishing feature of being diagnosed with ESRD is one’s significant need for renal dialysis. Thus, the Plan discriminates against ESRD patients based on their need for dialysis by targeting the primary treatment that individuals with ESRD (1) need exclusively, with the exception of rare, non-ESRD patients, and (2) need with far greater frequency than those few non-ESRD dialysis-users. MedBen’s primary counterargument to this assertion is that “[t]he Plan unequivocally provides for equal treatment of all dialysis patients in that all outpatient dialysis services for any medical reason are out-of-network.” MedBen Br. at 32. Similarly, before the district court, MedBen focused on the complaint’s reference to “the Plan’s general application to ‘dialysis patients, almost all of whom have ESRD,’” implying that DaVita’s failure to allege total overlap between dialysis patients and ESRD patients was fatal. R. 18 (MedBen Mot. to Dismiss at 12) (Page ID #204) (quoting R. 1 (Compl ¶ 55) (Page ID #20)). Yet there are two flaws with this counterargument. First, it addresses only the first basis of unlawful anti-ESRD differentiation set forth in the MSPA, and not the latter two bases. Addressing the lack of explicit discrimination in the Plan based on “the existence of end stage renal disease” is only one-third of the way toward defending the Plan’s legality.
Second, and perhaps more fatally, it represents a flawed understanding of
antidiscrimination law. It is true that, by targeting a service rather than a diagnosis, the Plan does
not explicitly discriminate against individuals with ESRD. As DaVita notes, however, “[a] direct
differentiation (or discrimination) claim does not require that the challenged activity affect
only
the disfavored group and no one else.” Reply Br. at 15. This is a well-established principle in
antidiscrimination jurisprudence. Take the Supreme Court’s decision in
Lawrence v. Texas
,
539 U.S. 558 (2003), for example. The challenged law criminalized sodomy between two
persons of the same sex.
Id.
at 562. Although same-sex partners are not the only class capable
of engaging in sodomy, the Court concluded that the overlap between the two made class-based
discrimination apparent: “When homosexual conduct is made criminal by the law of the State,
that declaration in and of itself is an invitation to subject homosexual persons to discrimination
both in the public and in the private spheres.” at 575.
Lawrence
also invalidated the Court’s
prior holding in
Bowers v. Hardwick
, 478 U.S. 186 (1986), a decision that had upheld the
criminalization of sodomy regardless of whether the participants were of the same sex.
See
Lawrence
,
Alternatively, the catch-all provision could support a disparate-impact claim against the Plan. That is, even if the Plan has not directly targeted ESRD patients by differentially treating the service they need far more than anyone else, it may have devised a reimbursement system that has the effect of singling out ESRD patients. The defendants argue that the non- differentiation provision does not permit proof through a disparate-impact theory, but they do so through analyzing the implementing regulations, rather than engaging with the text of the statute and Supreme Court caselaw suggesting that it supports disparate-impact liability. [15] In Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc. , 576 U.S. 519 (2015), the Court considered a provision of the Fair Housing Act (“FHA”) that made it unlawful
[t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to
negotiate for the sale or rental of, or otherwise make unavailable or deny, a
dwelling to any person because of race, color, religion, sex, familial status, or
national origin.
at 533 (quoting
unavailable[,]” which the Court determined was “equivalent in function and purpose” to the
phrase “otherwise adversely affect” found in both Title VII of the Civil Rights Act (“Title VII”)
and the Age Discrimination In Employment Act (“ADEA”),
id.
at 533–34.
[16]
Because “[i]n these
three statutes the operative text looks to results,” the Court held that “otherwise make
unavailable”—like the phrase “otherwise adversely affect”—“refers to the consequences of an
action rather than the actor’s intent” and “encompasses disparate-impact claims.”
Id.
at 534. As DaVita explains,
see
Appellant Br. at 47, there are at least two parallels between the
provision at issue in
Inclusive Communities
and the one at issue here. First, the phrase appears at
the end of a series of other prohibitions that deal with disparate
treatment
, counseling in favor of
it meaning something different from these other phrases.
See Inclusive Communities
, 576 U.S. at
534–35 (identifying the “relevant statutory phrases” in the FHA, Title VII, and the ADEA as
“[l]ocated at the end of lengthy sentences that begin with prohibitions on disparate treatment”);
see also
Appellant Br. at 42 (“[F]or these last two phrases to have any meaning, they must be
read as expanding the prohibition beyond explicit discrimination against ESRD patients.”).
Second, like the phrase “otherwise make unavailable,” the phrase “in any other manner” is
exceedingly broad, sweeping in less blatant forms of discrimination.
See Inclusive Communities
,
Moreover, the
Inclusive Communities
Court determined that the word “otherwise” means
“‘
in a different way or manner
,’ thus signaling a shift in emphasis from an actor’s intent to the
consequences of his actions.”
Inclusive Communities
,
MedBen’s principal response is that the implementing regulations for the non- differentiation provision foreclose both of DaVita’s theories of discrimination. [17] Given the lack of any ambiguity in the statutory text, however, we decline to defer to the implementing regulations. See Perez v. Postal Police Officers Ass’n , 736 F.3d 736, 740 (6th Cir. 2013). [18] (“Our analysis begins with the plain meaning and, if the language is unambiguous, ends there as well.”). And even if we viewed the phrases “need for renal dialysis” and/or “in any other manner” as ambiguous terms for which the agency might supply a reasonable interpretation, our analysis of these regulations, as discussed below, points to the same result.
Put simply, the non-differentiation regulations do more to confuse than to clarify, as they
appear to conflict with one another. Section 411.161(b)(2) of the Code of Federal Regulations
provides examples of unlawful differentiation in plan benefits, including a “[f]ailure to cover
routine maintenance dialysis or kidney transplants, when a plan covers other dialysis services or
other organ transplants.”
Yet the next provision in the regulations seems to suggest the opposite. It reads: (c) Uniform Limitations on particular services permissible. A plan is not prohibited from limiting covered utilization of a particular service as long as the limitation applies uniformly to all plan enrollees. For instance, if a plan limits its coverage of renal dialysis sessions to 30 per year for all plan enrollees, the plan would not be differentiating in the benefits it provides between plan enrollees who have ESRD and those who do not.
Yet even if we considered
For these reasons, DaVita has plausibly alleged that the Plan violates the non- differentiation provision of the MSPA, resulting in a denial of benefits and unlawful discrimination under ERISA.
2. The Take-Into-Account Provision
Similar reasoning extends to DaVita’s claim that the Plan violates the take-into-account
provision of the MSPA. As a reminder, this provision states that a group health plan “may not
take into account that an individual is entitled to or eligible for [Medicare benefits due to
ESRD]” during the thirty-month period when the plan is primary to Medicare.
***
Discovery will permit DaVita the opportunity to demonstrate that the Plan provided
Patient A differential benefits based on the Patient A’s “need for renal dialysis” or “in any other
manner,” or took into account Patient A’s eligibility for Medicare. If DaVita is successful, it
may demonstrate a violation of the MSPA, and in turn, two violations of ERISA. First, as
alleged in Count II of the complaint, violating the MSPA’s antidiscrimination provisions would
mean that the Plan did not reimburse DaVita “pursuant to the terms of the Plan document and
other applicable law.” R. 1 (Compl. ¶ 66) (Page ID #22).
IV. CONCLUSION
For the foregoing reasons, we AFFIRM in part, REVERSE in part, and REMAND for discovery and further proceedings on Counts I, II, and VII of DaVita’s complaint. Appendix to opinion of Moore, J.
DaVita, Inc. v. Marietta Mem. Hosp.
_________________
APPENDIX
_________________
(b) Medicare as secondary payer
…
(1) Requirements of group health plans
…
(C) Individuals with end stage renal disease
A group health plan (as defined in subparagraph (A)(v))— (i) may not take into account that an individual is entitled to or eligible for benefits under this subchapter undersection 426-1 of this title during the 12-month period which begins with the first month in which the individual becomes entitled to benefits under part A under the provisions ofsection 426-1 of this title, or, if earlier, the first month in which the individual would have been entitled to benefits under such part under the provisions ofsection 426-1 of this title if the individual had filed an application for such benefits; and
(ii) 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;
except that clause (ii) shall not prohibit a plan from paying benefits secondary to this subchapter when an individual is entitled to or eligible for benefits under this subchapter undersection 426-1 of this title after the end of the 12-month period described in clause (i). Effective for items and services furnished on or after February 1, 1991, and before August 5, 1997, (with respect to periods beginning on or after February 1, 1990), this subparagraph shall be applied by substituting “18-month” for “12-month” each place it appears. Effective for items and services furnished on or after August 5, 1997, (with respect to periods beginning on or after the date that is 18 months prior to August 5, 1997), clauses (i) and (ii) shall be applied by substituting “30-month” for “12-month” each place it appears.
… Appendix to opinion of Moore, J.
DaVita, Inc. v. Marietta Mem. Hosp.
(2) Medicare secondary payer
(A) In general.
Payment under this subchapter may not be made, except as provided in subparagraph (B), with respect to any item or service to the extent that— (i) payment has been made, or can reasonably be expected to be made, with respect to the item or service as required under paragraph (1), or (ii) payment has been made or can reasonably be expected to be made under a workmen’s compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self- insured plan) or under no fault insurance.
In this subsection, the term “primary plan” means a group health plan or large group health plan, to the extent that clause (i) applies, and a workmen’s compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance, to the extent that clause (ii) applies. An entity that engages in a business, trade, or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by a failure to obtain insurance, or otherwise) in whole or in part.
(B) Conditional payment
(i) Authority to make conditional payment The Secretary may make payment under this subchapter with respect to an item or service if a primary plan described in subparagraph (A)(ii) has not made or cannot reasonably be expected to make payment with respect to such item or service promptly (as determined in accordance with regulations). Any such payment by the Secretary shall be conditioned on reimbursement to the appropriate Trust Fund in accordance with the succeeding provisions of this subsection.
(ii) Repayment required
Subject to paragraph (9), a primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient’s compromise, waiver, or release (whether or not there is a determination or admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means. If reimbursement is not made to the appropriate Trust Fund before the expiration of the 60-day period that begins on the date notice of, or information related to, a primary plan’s responsibility for such payment or other information is received, the Appendix to opinion of Moore, J. DaVita, Inc. v. Marietta Mem. Hosp.
Secretary may charge interest (beginning with the date on which the notice or other information is received) on the amount of the reimbursement until reimbursement is made (at a rate determined by the Secretary in accordance with regulations of the Secretary of the Treasury applicable to charges for late payments).
(iii) Action by United States
In order to recover payment made under this subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan. The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity. The United States may not recover from a third-party administrator under this clause in cases where the third-party administrator would not be able to recover the amount at issue from the employer or group health plan and is not employed by or under contract with the employer or group health plan at the time the action for recovery is initiated by the United States or for whom it provides administrative services due to the insolvency or bankruptcy of the employer or plan. An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made pursuant to paragraph (8) relating to such payment owed.
…
(3) Enforcement
(A) Private cause of action
There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).
(1) Failure to pay primary benefits as required by subparts F, G, and H of this part 411. Appendix to opinion of Moore, J.
DaVita, Inc. v. Marietta Mem. Hosp.
(2) Offering coverage that is secondary to Medicare to individuals entitled to Medicare. (3) Terminating coverage because the individual has become entitled to Medicare, except as permitted under COBRA continuation coverage provisions (26 U.S.C. 4980B(f)(2)(B)(iv); 29 U.S.C. 1162.(2)(D); and 42 U.S.C. 300bb–2.(2)(D)).
(4) In the case of a LGHP, denying or terminating coverage because an individual is entitled to Medicare on the basis of disability without denying or terminating coverage for similarly situated individuals who are not entitled to Medicare on the basis of disability. (5) Imposing limitations on benefits for a Medicare entitled individual that do not apply to others enrolled in the plan, such as providing less comprehensive health care coverage, excluding benefits, reducing benefits, charging higher deductibles or coinsurance, providing for lower annual or lifetime benefit limits, or more restrictive pre-existing illness limitations.
(6) Charging a Medicare entitled individual higher premiums.
(7) Requiring a Medicare entitled individual to wait longer for coverage to begin. (8) Paying providers and suppliers less for services furnished to a Medicare beneficiary than for the same services furnished to an enrollee who is not entitled to Medicare. (9) Providing misleading or incomplete information that would have the effect of inducing a Medicare entitled individual to reject the employer plan, thereby making Medicare the primary payer. An example of this would be informing the beneficiary of the right to accept or reject the employer plan but failing to inform the individual that, if he or she rejects the plan, the plan will not be permitted to provide or pay for secondary benefits.
(10) Including in its health insurance cards, claims forms, or brochures distributed to beneficiaries, providers, and suppliers, instructions to bill Medicare first for services furnished to Medicare beneficiaries without stipulating that such action may be taken only when Medicare is the primary payer.
(11) Refusing to enroll an individual for whom Medicare would be secondary payer, when enrollment is available to similarly situated individuals for whom Medicare would not be secondary payer.
(a) Taking into account—
(1) Basic rule. A GHP may not take into account that an individual is eligible for or entitled to Medicare benefits on the basis of ESRD during the coordination period specified in § 411.162 (b) and (c). Examples of actions that constitute taking into account Medicare entitlement are listed in§ 411.108(a) .
…
(b) Nondifferentiation.
(1) A GHP may not differentiate in the benefits it provides between individuals who have ESRD and others enrolled in the plan, on the basis of the existence of ESRD, or the need for renal dialysis, or in any other manner. Appendix to opinion of Moore, J.
DaVita, Inc. v. Marietta Mem. Hosp.
(2) GHP actions that constitute differentiation in plan benefits (and that may also constitute “taking into account” Medicare eligibility or entitlement) include, but are not limited to the following:
(i) Terminating coverage of individuals with ESRD, when there is no basis for such termination unrelated to ESRD (such as failure to pay plan premiums) that would result in termination for individuals who do not have ESRD.
(ii) Imposing on persons who have ESRD, but not on others enrolled in the plan, benefit limitations such as less comprehensive health plan coverage, reductions in benefits, exclusions of benefits, a higher deductible or coinsurance, a longer waiting period, a lower annual or lifetime benefit limit, or more restrictive preexisting illness limitations. (iii) Charging individuals with ESRD higher premiums.
(iv) Paying providers and suppliers less for services furnished to individuals who have ESRD than for the same services furnished to those who do not have ESRD, such as paying 80 percent of the Medicare rate for renal dialysis on behalf of a plan enrollee who has ESRD and the usual, reasonable and customary charge for renal dialysis on behalf of an enrollee who does not have ESRD.
(v) Failure to cover routine maintenance dialysis or kidney transplants, when a plan covers other dialysis services or other organ transplants.
(c) Uniform Limitations on particular services permissible. A plan is not prohibited from limiting covered utilization of a particular service as long as the limitation applies uniformly to all plan enrollees. For instance, if a plan limits its coverage of renal dialysis sessions to 30 per year for all plan enrollees, the plan would not be differentiating in the benefits it provides between plan enrollees who have ESRD and those who do not.
(a) General rule. Except as specified in paragraph (b) of this section, the Medicare intermediary or carrier may make a conditional payment if—
(1) The beneficiary, the provider, or the supplier that has accepted assignment files a proper claim under the group health plan and the plan denies the claim in whole or in part; or (2) The beneficiary, because of physical or mental incapacity, fails to file a proper claim.
(b) Exception. Medicare does not make conditional primary payments under either of the following circumstances:
(1) The claim is denied for one of the following reasons:
(i) It is alleged that the group health plan is secondary to Medicare.
(ii) The group health plan limits its payments when the individual is entitled to Medicare. (iii) Failure to file a proper claim if that failure is for any reason other than the physical or mental incapacity of the beneficiary.
(2) The group health plan fails to furnish information requested by CMS and necessary to determine whether the employer plan is primary to Medicare.
_____________________________________________________________________ CONCURRING IN THE JUDGMENT IN PART AND DISSENTING IN PART _____________________________________________________________________ MURPHY, Circuit Judge, concurring in the judgment in part and dissenting in part.
Marietta Memorial Hospital offers its employees a group health plan. Like all group health plans, the “Marietta Plan” divvies up a finite pot of funds across the many healthcare services that employees might need. The plan offers varied reimbursement rates for different providers and services. The largest reimbursements go to “preferred providers” that have agreed to provide services at a discount. But the Marietta Plan lacks a preferred provider for dialysis services. According to DaVita, Inc., and DVA Renal Healthcare, Inc. (collectively, “DaVita”), the plan reimburses dialysis at uniquely low rates. The low rates allegedly have a disparate impact on the plan participants who use dialysis services the most—those with end stage renal disease. That disparate impact, DaVita claims, violates the Medicare Secondary Payer Act and the Employee Retirement Income Security Act (ERISA). Like other courts to consider this theory, the district court rejected it. I would affirm. I agree with my colleagues that DaVita was not assigned the claims it seeks to pursue in Counts III through VI. But I respectfully part ways with them on the other counts (Counts I, II, and VII).
First
, DaVita’s Count I does not allege a violation of the Medicare Secondary Payer Act.
That Act requires a group health plan to reimburse a provider before Medicare if both programs
cover a patient’s services, as will typically be the case for Medicare-eligible individuals with end
stage renal disease. To prevent private entities from shirking this primary-payer duty, the Act bars
them from enacting plan terms that “take into account” a participant’s Medicare eligibility or that
“differentiate” between those with end stage renal disease and others in the covered benefits.
Second
, DaVita’s Counts II and VII mistakenly rely on two inapplicable ERISA sections.
The first section gives plan participants a cause of action to enforce “the terms of the plan.”
I. Medicare Secondary Payer Act
In 1972, Congress provided Medicare benefits to individuals with end stage renal disease.
See
In 1989, Congress restructured the Medicare Secondary Payer Act into the format found
today at
A group health plan (as defined in subparagraph (A)(v))— (i) may not take into account that an individual is entitled to or eligible for benefits under this subchapter undersection 426-1 of this title during the [30]-month period which begins with the first month in which the individual becomes entitled to benefits under part A under the provisions ofsection 426-1 of this title, or, if earlier, the first month in which the individual would have been entitled to benefits under such part under the provisions ofsection 426-1 of this title if the individual had filed an application for such benefits; and
(ii) 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[.]
A. The Differentiate Clause
The differentiate clause states that a “group health 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[.]”
My answer: No. The clause prohibits plans that offer participants with end stage renal disease different benefits from others. A plan cannot, for example, cover dialysis services for all participants except those with end stage renal disease. Yet a plan that uniformly offers the same benefits to all groups does not violate this clause. That is so even if this neutral plan has a disparate impact on those with end stage renal disease because it provides lower reimbursement for services that they use. This reading follows from the relevant text, context, regulations, and precedent.
1. Text
The clause says that a “group health plan” may not “differentiate . . . between” groups of “individuals” “in the benefits it provides” “on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.” Id. This text’s component parts show that the clause prohibits plans that expressly engage in disparate treatment of individuals with end stage renal disease. It does not bar neutral plans that may have a disparate impact on those individuals.
Group Health Plan
. Start with the subject. The clause identifies a “group health plan” as
the thing that cannot engage in the differentiation. The act uses the definition of “group health
plan” from the Internal Revenue Code.
Differentiate Between . Congress’s verb choice indicates what those plan terms may not do: They may not “differentiate . . . between” two categories. The phrase “differentiate between” means “to establish or create the difference between people or things.” McGraw-Hill’s Dictionary of American Idioms and Phrasal Verbs 151 (2005); Random House , supra , at 552. To fall within this clause, therefore, the terms must create differences between the listed categories.
Individuals . The clause next identifies the categories that the plan terms may not create differences between: “individuals having end stage renal disease” and “other individuals covered by such plan.” The clause thus bars terms that establish differences between two groups of individuals ; it does not bar terms that establish differences between services . A plan might create service differences if it covers outpatient chemotherapy but not outpatient dialysis. Or it might do so if it requires a $20 copayment for cancer drugs, but a $50 copayment for similarly priced dialysis drugs. If, however, the plan applies these coverage choices to all participants, the plan has not established differences between “individuals.” It has treated all individuals equally.
Benefits
. The clause also suggests that it might not bar all differentiation between the two
groups, but only a subset of distinctions: those that are “in the benefits it provides” to participants.
It thus prohibits a plan from giving individuals with end stage renal disease a different “entitlement
to have payment made” for a healthcare service as compared to the entitlement offered to other
participants for the same service.
In Any Manner
. Congress lastly added a phrase to ensure that plan terms would not avoid
this prohibited differentiation by drawing clever distinctions. The clause notes that a plan may not
differentiate between the two groups of individuals “on the basis of the existence of end stage renal
disease, the need for renal dialysis, or in any other manner.” (This list likely contains a typo
because it makes no sense to say “on the basis of . . . in any other manner.” A regulation parroting
the statute thus adds an extra “or,” noting that a plan may not differentiate between individuals “on
the basis of the existence of [end stage renal disease], or the need for renal dialysis, or in any other
manner.”
The third item (“in any other manner”) bars other “ways” or “methods” that plans might
establish differences between individuals who have end stage renal disease and others.
See
9
Oxford English Dictionary
324 (2d ed. 1989). The “expansive” use of the word “any” bars any
similar differentiation between the two groups.
Freeman v. Quicken Loans, Inc.
,
Putting these phrases together, I read the clause as barring plan terms that give different benefits to individuals with end stage renal disease, either by name or by definitions that impliedly target that group. The text requires courts to ask: Do a plan’s terms offer different benefits to individuals with end stage renal disease? Or, to put it differently, would an end-stage-renal-disease diagnosis change the benefits that a participant receives? If the answer is “no,” the plan is facially neutral and has not differentiated between individuals in a way that the clause prohibits. In this case, moreover, DaVita makes no claim that the Marietta Plan would flunk this neutrality test.
2. Context
The Medicare Secondary Payer Act’s context confirms that we should interpret the
differentiate clause to prohibit plans that engage in express disparate treatment of those with end
stage renal disease, not neutral plans that have disparate impacts on them. The Act is not a
substantive healthcare law like the Affordable Care Act designed to regulate health-plan benefits.
Nor is it an antidiscrimination law like Title VII designed to protect against discrimination. Rather,
it is a coordination-of-benefits law designed to dictate “the order of payment” when two programs
cover the same service.
Blue Cross & Blue Shield of Tex., Inc. v. Shalala
,
Is the Act a substantive healthcare law?
No. A comparison of the Act to other healthcare
laws shows that it lacks the provisions that Congress uses when regulating the benefits that health
plans must offer. Take the Affordable Care Act. It requires certain health plans to cover a
minimum “essential health benefits package.”
Is the Act an antidiscrimination law?
No again. The Act lacks the defining features of the
specific antidiscrimination laws that the Supreme Court has read to impose disparate-impact
liability.
See Tex. Dep’t of Hous. and Cmty. Affairs v. Inclusive Cmtys. Project, Inc.
, 576 U.S.
519, 530–40 (2015) (Fair Housing Act);
Griggs v. Duke Power Co.
,
This rationale is missing here.
See Doe
,
Next, when finding that the antidiscrimination laws impose disparate-impact liability, the
Court relied on their “central purpose”: to “eradicate discriminatory practices within a sector of
our Nation’s economy.”
Id.
at 539. That rationale is also missing here. The Act serves a different
function: to protect
taxpayers
. As many courts have recognized, Congress passed the Act “[t]o
‘curb the rising costs of Medicare[.]’”
MSPA Claims 1, LLC v. Kingsway Amigo Ins. Co.
, 950 F.3d
764, 767 (11th Cir. 2020) (citation omitted);
Bio-Med. Applications of Tenn., Inc. v. Cent. States
Se. & Sw. Areas Health and Welfare Fund
,
“The oddity of applying disparate-impact discrimination in this area points in the same
direction.”
Doe
, 926 F.3d at 242. A disparate-impact framework would require a “wholly
unwieldy” analysis. (quoting
Alexander v. Choate
,
Consider, too, that an administrator’s coverage choices might depend on factors outside its
control. Here, for example, DaVita challenges Marietta’s failure to enter into a preferred-provider
contract with a dialysis provider. Should it matter whether Marietta made good-faith efforts to do
so? Should it matter whether a region’s dialysis market is highly concentrated, such that the rates
for dialysis are much higher than the rates for other services? What if a preferred dialysis provider
dramatically increases its prices? Would a plan be required to retain the provider on threat of a
disparate-impact suit? At day’s end, I see no “objective and workable standard for choosing a
reasonable benchmark by which to” decide whether a neutral plan has an illegal disparate impact
on those with end stage renal disease.
Holder v. Hall
,
Lastly, apart from disparate-impact claims, the antidiscrimination laws typically otherwise
bar a neutral practice only if adopted with an invidious
intent
to harm a protected group.
Ricci v.
DeStefano
,
In sum, any reading that would reach neutral group health plans would depart from the
Act’s context and prove unworkable. So even if I found some ambiguity in the clause’s plain text,
I would stick with the reading I have chosen: The clause bars differentiation between individuals,
not services.
See Util. Air Regulatory Grp. v. EPA
,
3. Regulations
Because “Congress has supplied a clear and unambiguous answer to the interpretive
question at hand,” I would not defer to how the relevant administrative agency (the Department of
Health and Human Services) approached this question if its view differed from my own.
Pereira
v. Sessions
,
A subsection entitled “Uniform Limitations on particular services permissible” states:
“A plan is not prohibited from limiting covered utilization of a particular service as long as the
limitation applies
uniformly
to all plan enrollees.”
The regulation also identifies four examples of improper “differentiation” that support my
reading that the clause prohibits differentiation between individuals, not services. It notes that a
plan engages in improper “differentiation” if it: ends coverage for “
individuals
” who have end
stage renal disease; imposes limits on those “
persons
” “but not on others enrolled in the plan”;
charges the “
individuals
” higher premiums; or reimburses healthcare providers less for services
furnished “to
individuals
who have” end stage renal disease as compared to the reimbursement for
the “same services” furnished to others.
That said, I agree that this regulation includes one outlier example that seems service-
based, not individual-based. The regulation suggests that a plan would violate this clause if it
failed “to cover routine maintenance dialysis or kidney transplants, when [it also] cover[ed] other
dialysis services or other organ transplants.”
4. Precedent
As far as I am aware, every district court to consider this question has interpreted this clause
as I do.
See DaVita, Inc. v. Marietta Mem’l Hosp. Emp. Health Benefit Plan
,
B. The Take-Into-Account Clause
The take-into-account clause states that a “group health plan” “may not take into account
that an individual is entitled to or eligible for benefits under”
First
, the text compels this reading. Like the differentiate clause, this clause applies to a
“group health plan,” not the employer or payer. So it regulates the “formal program” or
“arrangement,” not the motives of the “entities” that adopted it.
When the clause is read in this way, the Marietta Plan does not violate it. DaVita concedes
that the plan terms do not facially target Medicare-eligible individuals. Consider this point from
a participant’s perspective. A patient with end stage renal disease must seek dialysis treatments
under the Marietta Plan’s rates for the first three months.
See
Second
, the contextual factors I discussed earlier caution against finding liability for neutral
plan terms. If anything, these contextual clues apply with even more force here. To begin with,
nowhere does the take-into-account clause contain the type of “results-oriented” language that the
Supreme Court has required for disparate-impact liability.
Tex. Dep’t of Hous.
,
Third
, while I again find the language clear, regulations confirm my reading that the clause
bars discriminatory plan terms that target Medicare-eligible individuals, not neutral plan terms that
apply to all participants.
See
Fourth
, precedent again supports my view. The same district courts discussed above agree
that a plan only violates this provision when it “treats those eligible for Medicare differently than
those who are not.”
Marietta
, 2019 WL 4574500, at *3;
Dialysis of Des Moines
, 2019 WL
8892581, at *5;
Amy’s Kitchen
,
II. ERISA
While the parties’ briefing did not focus on the two ERISA causes of action that DaVita asserts in Counts II and VII, I find it unlikely that DaVita could rely on those provisions here.
A.
In Count II, DaVita alleges that it may enforce its alleged violation of the Medicare
Secondary Payer Act using ERISA’s private right of action in
Structural clues point in the same direction. A nearby paragraph—
Precedent confirms this reading.
See Cigna Corp. v. Amara
,
This text and precedent show that DaVita will encounter difficulty if it intends to rely on
B.
In Count VII, DaVita relies on this ERISA cause of action in
DaVita’s challenge to the Marietta Plan’s dialysis reimbursement rates thus does not fall
within
* * *
For these reasons, I respectfully concur in the judgment in part and dissent in part. I would affirm outright.
Notes
[1]
The following facts are undisputed unless otherwise noted. All facts are construed in the light most
favorable to the plaintiff.
See Lindenberg v. Jackson Nat’l Life Ins. Co.
,
[2] The district court’s opinion states conflicting bases for dismissing Count VII. Compare DaVita , 2019 WL 4574500, at *5 (appearing to dismiss Count VII on its merits, i.e., failure to allege a violation of the MSPA), with id. at *7 (“Counts Three through Seven are DISMISSED with prejudice, for lack of standing.”) (emphasis added). This conflict is irrelevant, however, given that we review the dismissal de novo whether it was based on the merits or on standing. See supra Part II.
[3] An appendix of the various statutes and regulations discussed in this opinion appears at the end of this opinion.
[4] Prior to 1980, workers’ compensation and other government benefits were also primary payers before Medicare. See Social Security Amendments of 1965, Pub. L. No. 89–97, § 1862(a).
[5]
This period is now thirty months.
[6]
The
Bio-Medical
panel’s identification of the “counterargument” to its interpretation of the statute
supports the conclusion that the “step[ping] in” language in
Bio-Medical
was dicta.
[7] DaVita raises this argument in the alternative to its argument that the MSPA does not require a conditional payment. See Appellant Br. at 36–40.
[8]
This is distinct from the question of standing,
see Cranpark, Inc. v. Rogers Grp., Inc.
,
[11] The only argument that any of the defendants makes with respect to standing and Count II is that DaVita failed to plead an injury by Patient A and therefore lacks standing. See Marietta Br. at 9–10. This is incorrect for reasons discussed above. See supra note 8.
[12]
The concurrence raises a new argument that neither party submitted to the district court, that the district
court did not consider in its decision, and that neither party briefed. The concurrence submits that DaVita cannot
enforce the MSPA through
[13]
With respect to Count VII, Marietta and the Plan argue only that DaVita has “fail[ed] to state a claim for
[a] violation of
[14]
The Plan’s allegedly singling out dialysis treatments corresponds with two of the regulations’ examples.
Example 2 contemplates the following scenario: a “group health plan has a $500 deductible on all benefits for
participants covered under the plan” and a participant files “a claim for the treatment of AIDS.”
[15]
The district court similarly dismissed the disparate-impact argument based on its focus on one subsection
of
[16]
The Supreme Court held that the phrase “otherwise adversely affect” confers a disparate-impact cause of
action in earlier cases.
See Griggs v. Duke Power Co.
,
[17] MedBen also argues that “costs exist under Medicare’s coverage structure for ESRD patients as well,” making it inappropriate “to simply assume . . . that potential exposure to out-of-pocket costs under a private plan serves as an incentive to opt for Medicare.” MedBen Br. at 29. But this argument represents a factual dispute, and at this stage, we assume that all of DaVita’s factual allegations—including DaVita’s allegation that high potential costs for ESRD patients on the Plan incentivize them to switch to Medicare—are true.
[18]
Nor do we hinge our analysis on the legislative history of the MSPA.
See Isle Royale Boaters Ass’n v.
Norton
,
[19] Our holding does not preclude a disparate impact view of the take-into-account clause.