Davita Inc. v. Virginia Mason MemorialDavita Inc. v. Virginia Mason Memorial
Appeal from the United States District Court for the Western District of Washington Barbara Jacobs Rothstein, District Judge, Presiding
Argued and Submitted October 8, 2020 Seattle, Washington
Opinion by Judge Graber
OPINION
GRABER, Circuit Judge:
Plaintiff DaVita, Inc., brought this action pursuant to the MSP’s private cause of action,
Reviewing de novo and taking the allegations in the complaint as true, Daewoo Elecs. Am., Inc. v. Opta Corp., 875 F.3d 1241, 1246 (9th Cir. 2017), we hold that dismissal of the complaint on that ground was erroneous. The statutory text, congressional purpose, and regulatory clues make clear that Congress did not intend payment by Medicare to be a prerequisite to bringing a private cause of action under the MSP. The private cause of action encompasses situations in which a primary plan impermissibly takes Medicare eligibility into account too soon, even if Medicare has not made any payments. Accordingly, we vacate in large part and remand for further proceedings.
BACKGROUND
A. ESRD and Medicare
More than 700,000 people in the United States have ESRD, also known as kidney failure. To survive, a person with ESRD requires either a kidney transplant or routine maintenance dialysis.
Congress responded to the critical need for dialysis and the high cost of treatment. When Congress created Medicare in 1965, the program encompassed only two categories of eligibility: age and disability.
Medicare is not, of course, the sole provider of healthcare benefits. Many other sources—such as worker’s compensation programs, tort-liability insurers, and group health plans—аlso provide healthcare benefits. When a patient is
Congress has allocated primary-payer responsibility between Medicare and other insurers through the MSP. For the 30 months following an individual’s Medicare eligibility due to ESRD, a group health plan may not “take into account” the person’s eligibility for Medicare.
B. Factual and Procedural History
Virginia Mason operates a nonprofit hospital in Yakima, Washington. Many hospital employees are eligible to enroll in Virginia Mason’s Plan, which is an “employee benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA“).
Virginia Mason’s Plan provides varying rates of reimbursement for benefits depending on whether the beneficiary visits an “in-network” provider or an “out-of-network” provider. The Plan has a separate provision pertaining to
Patient 1, a beneficiary of Virginia Mason’s Plan who has ESRD, received regular dialysis treatment from DaVita. For the first three months of treatment, when Patient 1 had not yet become eligible for Medicare, DaVita received “appropriate reimbursement” from the Plan’s third-party claims administrator. But beginning in the fourth month of treatment, when Patient 1 first became eligible for Medicare due to ESRD and when Medicare became the secondary payer, the Plan reimbursed DaVita at the special reimbursement rate described above. The Plan paid that lower rate for 20 months. DaVita alleges that Patient 1 then “switched from the Plan to Medicare for primary coverage for dialysis treatments,” and the Plan apparently ceased all payments to DaVita.
As noted, the district court ruled that the MSP’s private cause of action applies only when Medicare has made a payment. Because DaVita did not allege that Medicare had made a payment, the court dismissed the complaint for failure to state a claim. DaVita timely appeals.
DISCUSSION
The parties dispute the scope of the MSP’s private cause of action,
A. Overview of the MSP
The MSP provisions all are found in
1. Secondary-Payer Designation
The Medicare as Secondary Payer provisions, as the name suggests, designate Medicare as the secondary payer in certain circumstances when both Medicare and a non-Medicare entity have independent duties to pay for a covered person’s healthcare costs. The MSP itself does not impose a duty to pay on Medicare or on any other entity. Instead, the MSP “presupposes an existing obligation (whether by statute or contract) to pay for covered items or services.” Humana Med. Plan v. W. Heritage Ins. Co., 832 F.3d 1229, 1237 (11th Cir. 2016). Medicare’s duty arises from statutory provisions that govern Medicare. And a non-Medicare entity’s duty arises from a separate legal source, such as a tort-insurance policy or a group health plan.
How the MSP designates Medicare as the secondary payer is less direct than one might expect; the statute does not contain a straightforward provision that the non-Medicare entity must pay first and that Medicare must pay second. Instead, the MSP always has accomplished the same goal through two main clauses. First, the MSP forbids payment by Medicare when another insurer has paid or is expected to рay.
Paragraph (2) of the present-day statutory text is titled “Medicare secondary payer.”
As originally enacted in 1965, the MSP designated Medicare as the secondary payer solely with respect to state and federal worker’s compensation laws and plans.
In 1980, Congress responded to that costly arrangement. Congress expanded the reach of the MSP by designating Medicare as the secondary payer with respect to tort-liability insurance of all stripes: “an automobile or liability insurance policy or plan (including a self-insured plan)” and “no fault insurance.” Pub. L. No. 96-499, 94 Stat. 2599 (Dec. 5, 1980);
2. Substantive Requirements for Group Health Plans
With respect to group health plans specifically, Congress went beyond merely giving Medicare secondary-payer status. Originally, the MSP did not impose any substantive requirements on group health plans. So far as the MSP was concerned, insurers were free to craft plan provisions that accounted for Medicare eligibility or that offered differing treatment to, for example, seniors or those diagnosed with ESRD. In the late 1980s, Congress enlarged the scope of the MSP by enacting substantive requirements, generally prohibiting group health plans from “tak[ing] into account” a person’s Medicare enrollment or eligibility and from offering differing benefits to working seniors or ESRD patients. Pub. L. No. 101-239, 103 Stat. 2106 (Dec. 19, 1989); Pub. L. No. 99-509, 100 Stat. 1874 (October 21, 1986).
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 under section 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 of section 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 of section 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[.]
3. Enforcement Mechanisms
Similarly, Congress has strengthened the MSP‘s enforcement mechanisms ovеr time. Congress originally incentivized compliance solely through mild tax consequences.
B. Analysis
1. Statutory Text
“We begin, as usual, with the statutory text.” Maslenjak v. United States, 137 S. Ct. 1918, 1924 (2017). The “Private Cause of Action” provision states, in full:
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).
The cause of action is thus available whenever a primary plan fails to take a specific action: paying in accordance with two provisions. Nothing in the statutory text concerns an act or omission by Medicare. Indeed, the text does not mention Medicare at all; it merely authorizes suit whenever a primary plan fails to make an appropriate payment. Nor would it have been hard for Congress to include payment by Medicare as an element. For example, Congress could have added “when the Secretary has made a conditional payment” or “to recover payment made under this subchapter.” Congress did exactly that in defining the scope of the government’s cause of action, which begins: “In order to recover
Defendants nevertheless insist that Congress intended to require payment by Medicare as a prerequisite to suit. Defendants urge us to infer that prerequisite from the statutory text authorizing suit whenever a primary plan fails to pay “in accordance with paragraphs (1) and (2)(A).”
“Determining when a primary plan violates paragraph (1) is easy.” Bio-Medical, 656 F.3d at 285. As we described above, paragraph (1) contains substantive prohibitions that apply to group health plans. So, in order to pay in accordance with paragraph (1), a group health plan must not violate those prohibitions. For example, pertinent here, subparagraph (1)(C) bars a group health
Defendants direct us instead to the provision’s reference to a plan’s failure to pay in accord with subparagraph (2)(A). That provision forbids Medicare from making payments when another plan has paid or is expected to pay; at first glance, it does not affirmatively direct primary plans to do anything. The Sixth Circuit aptly summarized:
How can a primary plan fail to make a payment in accordance with subparagraph (2)(A), if that subparagraph only instructs when Medicare, and not primary plans, may or may not make payments?
Bio-Medical, 656 F.3d at 286 (emphasis omitted).
The answer, in our view, is not complicated. As we discussed above, and as we held in Parra, 715 F.3d at 1152, subparagraph (2)(A) assigns secondary-payer status to Medicare and therefore necessarily assigns primary-payer status to the private insurer. Indeed, the original version of the cause-of-action provision made that implication explicit, referring to the various insurance types, including group health plans, as having been “made a primary payer” by the predecessor clauses to current subparagraph (2)(A).
Applying that insight here, any mystery about the scope of the private right of action falls away. Paragraph (1) imposes substantive requirements on group health plans, thereby requiring benefit calculations consistent with those requirements. Subparagraph (2)(A) designates the private insurer, in prescribed circumstances, as the primary payer, thereby requiring payment before Medicare has paid (or requiring reimbursement if Medicare has paid already). A plan’s payment must comport with both the substantive requirements of paragraph (1) and the primary-payer requirement of subparagraph (2)(A).
Notably, a plan’s failure to abide by those requirements does not always cause Medicare to make a conditional payment. If a plan refuses to cover persons with ESRD, for example, in violation of paragraph (1), then Medicare might make a payment. But if, as alleged here, a plan violates paragraph (1) yet pays more than the Medicare rate, then Medicare will not make any additional payments.
Similarly, if a plan fails to pay consistent with its assigned primary-payer status—for example, by declining to pay until after Medicare has paid or by paying an amount that subtracts an amount equal to an expected Medicare payment—then that failure will not necessarily cause Medicare to make a payment. Indeed,
In other words, a group health plan’s failure to pay consistent with its substantive obligations or its failure to pay consistent with its primary-payer status sometimes results in payment by Medicare and sometimes does not result in payment by Medicare. But the private cause-of-action provision looks solely to the group health plan’s actions, not to the downstream effect of those actions. Whether a “primary plan . . . fails to provide for primary payment (or appropriate reimbursement) in accordance with” two requirements does not ask whether Medicare has made a payment.
We acknowledge that the only other circuit court to have examined the pertinent text in detail has reached the oрposite conclusion. In a thoughtful analysis, the Sixth Circuit adopted a different reading of the relevant provision’s reference to subparagraph (2)(A). DaVita, Inc. v. Marietta Mem‘l Hosp. Empl. Health Benefit Plan, 978 F.3d 326, 337–40 (6th Cir. 2020); Bio-Medical, 656 F.3d at 284–87. Overlooking the functional effect of subparagraph (2)(A), the court
We respectfully disagree. As discussed above, a plan’s failure to pay consistent with its obligations only sometimes triggers payment by Medicare. Moreover, the statutory provisions concerning conditional payments by Medicare are found in subparagraph (2)(B), not subparagraph (2)(A). Subparagraph (2)(B) is titled “Conditional payment“; subparagraph (2)(B)(i) authorizes conditional рayments by Medicare; and subparagraph (2)(B)(ii) requires a primary plan to make an appropriate reimbursement. If Congress had referenced those statutory provisions directly in the cause-of-action provision, we might infer a prerequisite of payment by Medicare. But Congress did not refer to those provisions directly; instead, it required only that primary plans pay in accordance with paragraphs (1) and (2)(A). It is true that subparagraph (2)(A) states that Medicare may not make payments except as provided in subparagraph (2)(B). But if the cause-of-action provision’s aim were to require a payment by Medicare in order to sue, then why
Returning to the text of the cause-of-action provision, we emphasize a subtle but important point. The statute authorizes suit whenever a plan “fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).”
Formal logic supports that interpretation. Known as one of De Morgan’s laws, the principle holds that the condition of “not (A and B)” is satisfied if either “not A” or “not B.” Irving M. Copi & Carl Cohen, Introduction to Logic 331–32 (14th ed. 2011); Peter Smith, An Introduction to Formal Logic 61, 100 (2003); see also R.L. Goodstein, Boolean Algebra 6–7 (Dover ed. 2007). Courts have applied De Morgan’s laws in interpreting statutes. E.g., Schane v. Int’l Broth. of Teamsters Union Local No. 710 Pension Fund Pension Plan, 760 F.3d 585, 589–90 (7th Cir. 2014); United States v. One 1973 Rolls Royce, 43 F.3d 794, 814–15 (3d Cir. 1994). Of course, statutory interpretation is not a rigid mathematical exercise; when considering De Morgan’s laws, “[c]ontext matters.” Schane, 760 F.3d at 590; see generally Lawrence M. Solan, The Language of Judges 45–63 (1993) (discussing the principles at some length). But the context here decisively confirms our interpretation.
The principle is best illustrated by example where, as here, the two clauses establish separate requirements that govern an action. If a hypothetical statute
The MSP’s private cause-of-action provision operates in the same way. Paragraph (1) imposes substantive requirements on group health plans, and subparagraph (2)(A) requires the private insurer to pay first. A plan fails to pay in accordance with those provisions either by violating the substantive provisions in paragraph (1) or by failing to pay consistently with its primary-payer status.
Careful study of the private cause-of-action provision also confirms that interpretation. This case involves a suit against a group health plan. But the cause-
Finally, we note that the Sixth Circuit began its analysis with the opposite assumption: that the cause of action requires two separate failures, a failure to pay in accord with paragraph (1) and a failure to pay in аccord with subparagraph (2)(A). Marietta, 978 F.3d at 337; Bio-Medical, 656 F.3d at 285. Because of that assumption, the Sixth Circuit was unable to make sense of the statute; the court thus abandoned the approach, determining instead to “consider paragraphs (1) and (2)(A) collectively, rather than individually.” Marietta, 978 F.3d at 337 (quoting Bio-Medical, 656 F.3d at 286). For the reasons that we have explained above, we think that Congress intended to permit a private action if an insurer fails to abide by either obligation.
In sum, paragraph (1) provides the substantive obligations of a group health plan, and subparagraph (2)(A) designates a plan as the primary payer in certain circumstances. Those two provisions, together, create an obligation on a plan to make a primary payment in some circumstances, and the statute allows suit whenever a plan fails to meet its obligation in either respect.
Our interpretation yields a tidy result. For group health plans, paragraph (1) requires payment according to certain substantive terms, such as not taking into
Similarly, one can imagine the reverse situation, in which the group health plan’s terms and calculations are proper, but the plan declines to pay on the improper basis that Medicare must pay first (or the plan waits for Medicare to pay first and then pays the balance only). In that situation, the plan arguably did not fail to pay in accordance with paragraph (1), because the plan’s terms and calculations are proper; but the plan clearly failed to pay in accordance with subparagraph (2)(A), because it made no payment (or a secondary payment only). The plan’s violation of subparagraph (2)(A) would give rise to а cause of action. Similarly, as noted above, a tort-liability insurer cannot fail to pay in accord with paragraph (1), because it does not apply; but a tort-liability insurer’s refusal to assume primary-payer status, contrary to subparagraph (2)(A), would give rise to a cause of action. It may seem implausible today that a plan would blatantly contradict the MSP by asserting that Medicare must pay first. But we note that, for
Our reading of the cause-of-action provision does not require payment by Medicare as a prerequisite to suit. In that sense, the reading is broader than a rule that requires payment by Medicare. But our interpretation is, in at least one way, more limited than the reading adopted by some courts. E.g., MSP Recovery, LLC v. Allstate Ins. Co., 835 F.3d 1351, 1358 (11th Cir. 2016). Specifically, our reading does not convert ordinary billing disputes into MSP claims giving rise to double damages. If a plan denies payment for any reasоn other than those reasons forbidden by paragraphs (1) and (2)(A), then no MSP claim is available. For example, no MSP claim would be available if the insurer declines to pay because of a good-faith assertion4 that the beneficiary has reached the plan’s maximum payments, that the claim is fraudulent, that the beneficiary failed to obtain pre-approval for a service, that the beneficiary’s coverage had expired, and so on. Those disputes would require resolution through ordinary ERISA channels or state-law contract claims. An MSP claim, and its allowance of double damages,
2. The Purpose of the Statute
“In determining a statutory provision’s meaning, we may consider the purpose of the statute in its entirety, and whether the proposed interpretation would frustrate or advance that purpose.” Brower v. Evans, 257 F.3d 1058, 1065 (9th Cir. 2001) (internal quotation marks omitted). As we explain below, the MSP’s purpose strongly supports our interpretation of the statutory text.
There is no dispute that “the оverarching statutory purpose” of the MSP provisions is to “reduc[e] Medicare costs.” Zinman v. Shalala, 67 F.3d 841, 845 (9th Cir. 1995). Indeed, until the late 1980s, the sole function of the statutory provisions was to save Medicare money. Those versions of the MSP contained only provisions requiring plans to make primary payments, that is, to pay before Medicare.
But beginning in the late 1980s, Congress added many provisions that go well beyond simply requiring plans to make primary payments. Indeed, nearly all of the provisions in what is now paragraph (1) protect persons from differing treatment by group health plans. For example, for most persons enrolled in Medicare—whether due to age, disability, or ESRD—group health plans generally may not take into account Medicare enrollment and must provide benefits identical
Those provisions go well beyond protecting the Medicare Trust Fund. If Congress’ aim were solely to protect the fisc, then Congress could have required that group health plans not reduce benefits in a way that caused Medicare to pay, or it could have limited the protections to items or services covered by Medicare. But Congress did much more: If a beneficiary has a “Cadillac plan,” for example, it must remain a Cadillac plan even if the beneficiary enrolls in Medicare. Plans must continue coverage of all items and services—even those not covered by Medicare—despite the fact that coverage of those items and services could not possibly affect Medicare’s coffers. And plans may not treat persons with ESRD differently even if they are not enrolled in Medicare. Notably, somе persons with ESRD never go on Medicare, and nearly everyone with ESRD is ineligible for
In sum, the purpose of the MSP today is twofold: to protect the fisc and to provide equal treatment to certain categories of persons. Subparagraph (2)(A) aims to protect the fisc by assigning primary-payer status to private insurers, and paragraph (1) contains the equal-treatment provisions. The private cause of action refers to both provisions. Consideration of congressional purpose thus strongly supports our interpretation, which gives effect to both congressional purposes—protecting the fisc and requiring equal treatment. Notably, Defendants’ interpretation advances only one of those purposes, by blessing blatantly unequal treatment so long as that mistreatment does not directly harm the fisc.5
We decline Defendants’ invitation to infer, from Congress’ purportedly “sole” purpose of protecting the fisc, an intent by Congress to require payment by Medicare as a prerequisite to bringing a private action. Most fundamentally, although we agree that protecting the fisc is the MSP’s overarching goal, we disagree that Congress had no other aims. As described in detail above, many of the substantive requirements in paragraph (1) go far beyond protecting Medicare’s funds. None of the cases just cited considered the substantive requirements of paragraph (1), so it is not surprising that those courts focused on the MSP’s main objective. We remain convinced that Congress’ purpose was dual: to protect the fisc and to require equal treatment in some circumstances.
In enacting the MSP, Congress sought to save Medicare money, and it also sought to require equal treatment by group health plans in some circumstances.
3. Regulatory Clues
Finally, we consider whether regulatory documents shine any light on the scope of the private cause of action. We find most illuminating a rulemaking in 1989, found at 54 Fed. Reg. 41,718. In response to a proposed rule on when Medicare would make payments, some commenters had requested that Medicare make conditional payments sooner if a primary plan declined to pay. 54 Fed. Reg.
Defendants’ regulatory citations do not advance the analysis. Title
Defendants’ other two citations, the MSP Manual and
In sum, to the extent that the regulatory documents relate to the scope of the private cause of action, they support our interpretation that payment by Medicare is not a prerequisite to suit.
4. Summary
The statutory text, congressional purpose, and regulatory clues all point in the same direction: Congress intended the private cause of action to encompass suits resulting from statutorily noncompliant payments by primary plans. Payment by Medicare is not a prerequisite to suit.
C. Result in This Case
For the first 20 months of Patient 1’s eligibility for Medicare due to ESRD, Patient 1 was a beneficiary of Virginia Mason’s Plan. DaVita alleges that, during that period, Defendants paid a lower rate for dialysis solely because of Patient 1’s eligibility for Medicare, in violation of
After the first 20 months, Patient 1 dropped his or her coverage under Virginia Mason’s Plan. Patient 1 ceased to be a beneficiary of Virginia Mason’s Plan, and Medicare became Patient 1’s primary insurer. The MSP designates Medicare as the secondary payer for the first 30 months of Medicare eligibility. Had Patient 1 stayed enrolled in Virginia Mason’s Plan, the Plan would have been the primary payer for 10 more months. As the district court held, the Plan clearly was not a “primary plan” during those 10 months, because Patient 1 was not a beneficiary of the Plan. DaVita’s theory is that it nevertheless may seek damages for non-рayment during those 10 months because, according to DaVita’s briefing to us, the Plan’s reduced payments during the preceding 20 months caused Patient 1 to drop coverage under the Plan.
We conclude that the complaint fails to allege causation plausibly. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). If the reduced payments caused Patient 1 to drop coverage, then Plaintiff could have so alleged. Instead, the complaint only
In the absence of a direct allegation of causation, we do not find the inference of causation plausible in light of the other allegations. So far as the complaint alleges, the Plan did not change Patient 1’s benefits in any way other than the amount that it paid the dialysis provider: no increased premiums, deductibles, or co-payments, or any other reduction in benefits that would be obvious to a beneficiary. Indeed, there is no allegation that Patient 1 was even aware of the reduction in payments from the Plan to the provider. If DaVita had billed Patient 1 for the balance or threatened to do so, causation might be plausible. But DaVita has not alleged that it did either one of those things. In other words, the Plan’s reduced payments for dialysis could have caused Patient 1 to leave the Plan only if Patient 1 noticed the change in payment amount and became concerned about the theoretical possibility that DaVita would bill him or her for the balance (even though DaVita had not done so for 20 months). The complaint contains neither a straightforward allegation of causation nor any allegation suggesting that the reduced payments caused Patient 1 to drop coverage.
In sum, after Patient 1 dropped coverage under the Plan for a reason unconnected to Defendants’ obligations under the MSP, Patient 1 ceased to be a
AFFIRMED in part, VACATED in part, and REMANDED. The parties shall bear their own costs on appeal.
Notes
(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 insurаnce, 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.
That line of reasoning fails to account for the equal-treatment provisions that apply to persons not enrolled in Medicare. But even overlooking that detail, the argument still fails on its own terms. If the equal-treatment provisions provide indirect protection of the fisc, then allowing rigorous enforcement of those provisions (even when there is no direct harm to the fisc) has the effect of protecting Medicare’s funds. So even if we assume that Congress’ sole concern was reducing Medicare’s costs, our interpretation nevertheless advances that cause. In fact, by allowing suit in instances of both direct and indirect threats to Medicare, our interpretation protects Medicare’s funds better than Defendants’ interpretation would, because Defendants’ narrow interpretation permits suit only in cases of direct harm.