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High court backs hospital in dialysis reimbursement squabble

Dissenting justices accuse the majority of breaking the solution crafted by Congress to make sure that insurance plans don't shift the high costs of dialysis to Medicare.

WASHINGTON (CN) — A medical benefits plan for Ohio hospital workers prevailed Tuesday at the U.S. Supreme Court in a challenge against its scheme of undercutting Medicare rates in its reimbursement of treatment costs for end-stage renal disease.

DaVita, one of the two major dialysis providers in the United States, brought the case at hand, saying that the Marietta Memorial Hospital Employee Health Benefit Plan intentionally sets meager reimbursement rates for end-stage renal disease care so that members will abandon the plan and make Medicare their primary payer.

Under the hospital's plan, any member of the hospital's plan who gets dialysis from DaVita ends up making higher copayments, coinsurance payments and deductibles on their treatment than they would if they went through Medicare.

At the Sixth Circuit, DaVita persuaded the federal appeals court that the reimbursement scheme could be contravening a federal law called the Medicare Secondary Payer Act as well as the Employee Retirement Income Security Act — both of which bar group health plans from giving different benefits to members depending on whether they are in end-stage renal failure and from treating dialysis providers differently as compared with other medical providers.

The U.S. Solicitor General's Office sided with the hospital plan at Supreme Court oral arguments, however, and the justices reversed 7-2 on Tuesday.

Stating that Congress had not dictated “any particular level of dialysis coverage by a group health plan” in federal law, Justice Brett Kavanaugh Tuesday wrote for the majority that the Marietta Memorial plan does not “differentiate in the benefits it provides” to those with end-stage renal disease and those without end-stage renal disease.

“If Congress wanted to mandate that group health plans provide particular benefits, or to require that group health plans ensure parity between different kinds of benefits, Congress knew how to write such a law,” Kavanaugh wrote. “It did not do so in this statute. To the extent that Congress wants to create such a system going forward, Congress of course may do so.”

What’s more, he said the Ohio hospital’s plan doesn’t consider whether a participant is entitled to or eligible for Medicare.

Justice Elena Kagan took issue with this part of the ruling Tuesday in a brief but pointed dissent, saying that her colleagues in the majority had crafted “a massive and inexplicable workaround” of the Medicare Secondary Payer Act.

“As the majority recognizes, the MSPA’s renal disease provisions were designed to prevent plans from foisting the cost of dialysis onto Medicare. Yet the Court now tells plans they can do just that, so long as they target dialysis, rather than the patients who rely on it, for disfavored coverage,” Kagan wrote, joined by Justice Sonia Sotomayor. “Congress would not — and did not — craft a statute permitting such a maneuver. Now Congress will have to fix a statute this Court has broken.”

Kagan added that the majority’s finding about coverage differentiation “flies in the face of both common sense and the statutory text.”

Kavanaugh noted Tuesday that the provider’s position “would ultimately require group health plans to maintain some (undefined) minimum level of benefits for outpatient dialysis.” 

John Kulewicz, who represented the Marietta Memorial Hospital plan, applauded Tuesday's outcome. 

“We thank the Supreme Court for hearing our case and for the close reading that it has given to the Medicare Secondary Payer Act,” the attorney wrote in an email.

DaVita’s lawyer Seth Waxman of WilmerHale did not return a request for comment.

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