Americans are worrying how they will pay for everything from their groceries to health care expenses due to rising inflation.

Those struggling with chronic and life-threatening illnesses have been crushed with co-pays and deductibles for decades, and matters may get worse following the June 21 Supreme Court of the United States ruling in Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc.

The case has the possibility of redefining how insurance benefit plans pay for end-stage and chronic diseases.

Marietta v. DaVita’s central question is about the level of benefits for dialysis among end-stage renal disease (ERSD) patients who have private or employer-sponsored health insurance plans. The ruling impacts pre-existing conditions, lifetime benefit caps and discrimination of disease processes.

In response to developments in hemodialysis and renal transplantation, Congress adopted in 1972 a special provision for ESRD patients in an amendment to the Social Security Act.

The plan authorized Medicare to pay for dialysis from the third month following an ERSD diagnosis until 12 months following a renal transplant.

As this created an unsustainable financial burden for the government, Congress passed the Medicare Secondary Payer Act in 1980, which made private insurance the primary coverage for certain types of patients.

For ESRD patients, the secondary payer program works as follows: if a patient is eligible for Medicare and has a group health plan, then private insurance is designated as the patient’s primary insurance and obligated to fund dialysis for the first 30 months after a diagnosis of ESRD.

During this period, the primary insurance provider must cover the costs even if the patient is eligible for Medicare. After this 30-month period, Medicare becomes the patient’s primary insurance payer for purposes of dialysis.

The purpose of this approach was to prevent employers and their insurance providers from forcing patients off private insurance and onto Medicare.

On April 15, 2017, DaVita, one of the nation’s largest dialysis providers, began providing services to a patient who was covered by the Marietta Memorial Hospital’s employee benefit plan.

All dialysis services were classified by the plan as out of network, resulting in a significantly higher copay requirement. In addition, the plan reimbursed the dialysis provider at 87.5% the rate used by Medicare, significantly lower than other private insurances.

On Dec. 19, 2018, DaVita sued Marietta in the Southern District of Ohio, alleging that the employee insurance plan violated the Employee Retirement Income Security Act of 1974 and the MSPA, essentially asserting that the hospital’s plan illegally incentivized participants diagnosed with ESRD to drop their coverage and enroll in Medicare.

Marietta countered by pointing out that the plan in question does not differentiate between participants needing short-term dialysis and participants diagnosed with ESRD who would need chronic dialysis. Thus, benefit limits apply equally to all enrollees and the plan does not violate the statute.

On Feb. 14, 2019, Marietta filed to dismiss, and the motion was granted by the district court, but DaVita appealed, and the Sixth Circuit reversed the lower court’s ruling, arguing that limited payments for dialysis disproportionately impact patients with ESRD.

A second appeal was filed by Marietta and because the Ninth Circuit’s ruling on its appeal contradicted the Sixth Circuit ruling, the Supreme Court agreed to take the case, hearing oral argument on March 1, 2022.

SCOTUS upheld Marietta’s position in a 7-2 decision, with the majority opinion written by Justice Kavanaugh asserting that Marietta did not violate the MSPA because it provided the same benefits to all enrollees regardless of a diagnosis of ESRD or eligibility for Medicare. Because the plan offers equal benefits for participants regardless of a diagnosis of ESRD, the majority said it is compliant with the statute.

Kavanaugh’s opinion aligns with a longstanding reading of the Health Insurance Portability and Accountability Act of 1996, which requires benefits to be uniformly available to all similar participants.

One of the reasons for the rule was to ensure that HIV-positive patients were not cheated and forced to have a lower lifetime insurance payment cap due to diagnosis.

Private insurance plans got around this by having a lower cap for HIV-related services for all group members but not a lower cap for total lifetime services.

Technically, this was the same benefit for all, but it clearly was an attempt to target HIV-positive patients and to limit the services they needed.  Similar tactics have been used with mental health services as well.

This is similar to Marietta’s approach that creates an artificial limit for dialysis services, knowing that it will apply mostly to ESRD patients and will force ESRD patients onto Medicare. As a result, African Americans, who account for 35% of the nation’s ESRD patients despite being only 13% of the general population, are disproportionally impacted.

Whether motivated racially or purely focused on the company’s bottom line, the tactic is inappropriate.

In essence, Marietta identified a loophole in the MSPA and found a way to push vulnerable patients off employer plans and onto Medicare, thus saving insurers tens of thousands of dollars.

Unless Congress moves quickly, more insurance providers will follow the same model, forcing countless ESRD patients to convert to Medicare prior to the end of the 30-month period. This will shift the burden to taxpayers and not to insurance companies who have been collecting premiums from these patients for years.

In addition, such strategies could be applied to other end-stage diseases or chronic conditions, such as congestive heart failure, chronic obstructive pulmonary disease patients and any number of chronic diseases.

This type of gaming the system is inappropriate and, if left unchecked, will impact tens of millions of vulnerable Americans.

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