OPINION ANALYSIS

Justices validate denial of insurance coverage for outpatient dialysis

Tuesday’s opinion in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc. laid out a roadmap for private insurers to shift the costs of end-stage renal disease to Medicare, as the court approved a private health plan that singles out the provision of outpatient dialysis for low reimbursement, a plan likely to push those patients out of the private market and onto Medicare.

The case involved a coordination-of-benefits statute, which allocates the costs of medical care between private health plans and Medicare. In this particular case, the statute obligates private insurers to cover the costs of dialysis for the first 30 months after a patient is diagnosed with end-stage renal disease. Recognizing that insurers might try to force those (expensive) customers off their private plan and into the publicly funded Medicare system, Congress prohibited insurers from discriminating against patients with end-stage renal disease. Specifically, the statute provides that a plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan.”

Marietta had the bright idea that it could solve this problem by providing unusually low reimbursement rates for outpatient dialysis. This is an effective way to lower the costs of customers with end-stage renal disease because about 99.5% of the patients that receive outpatient dialysis have end-stage renal disease. DaVita (one of the two largest dialysis providers in the United States) objected, arguing that discriminating against patients who receive outpatient dialysis is the same thing as discriminating against patients with end-stage renal disease. The lower courts agreed, but the Supreme Court rejected that argument by a 7-2 vote.

Justice Brett Kavanaugh’s opinion justifying that result was succinct – not quite seven pages. He took a strictly literalist approach to the statute. For him, the only thing that matters is that Marietta “provides the same benefits, including the same outpatient dialysis benefits, to individuals with and without end-stage renal disease.” Accordingly, he reasoned, “the Plan does not ‘differentiate in the benefits it provides between individuals’ with and without end-stage renal disease.”

Kavanaugh characterized DaVita’s contention as an argument “that the statute authorizes liability … if [a] limitation on benefits has a disparate impact on individuals with end-stage renal disease.” He easily rejected that contention, pointing to the text of the statute as “requiring [an] inquiry into whether a plan provides different benefits” rather than an inquiry into “the effects of non-differentiating plan terms that treat all individuals equally.” For Kavanaugh, DaVita’s contrary interpretation is intolerable, because it “would ultimately require group health plans to maintain some (undefined) minimum level of benefits for outpatient dialysis,” something Congress plainly did not intend.

A dissent by Justice Elena Kagan (joined by Justice Sonia Sotomayor) argued that the decision “flies in the face of … common sense,” explaining that “[o]utpatient dialysis is an almost perfect proxy for end stage renal disease.” Repeating a comment from the oral argument, she argued that it “should make no difference” if “a proxy is only 99.5% (not 100%) accurate …. A tax on yarmulkes remains a tax on Jews, even if friends of other faiths might occasionally don one at a Bar Mitzvah.”

Perhaps the most weighty thing on which the justices were unable to agree is whether to describe the type of renal disease as “end-stage” (with a hyphen) or “end stage” (without a hyphen). The majority, following the New York Times style, uses the hyphen; the dissent, following congressional practice, does not.