An employer health plan didn't violate federal law by limiting outpatient dialysis benefits for policyholders, the Supreme Court ruled Tuesday.

The 7-2 decision holds that Marietta Memorial Hospital Employee Health Benefit Plan in Ohio followed Medicare statute because its plan doesn't differentiate benefits for participants with end-stage renal disease. The decision reverses a 2020 ruling by the U.S. Court of Appeals for the 6th Circuit.

The hospital's health plan offers low reimbursement rates for outpatient dialysis services that discourage providers from joining its network and effectively makes all of them out-of-network, the leading dialysis provider DaVita contended in its lawsuit.

DaVita sued Marietta Memorial Hospital Employee Health Benefit Plan in 2018, alleging its policy limits dialysis coverage. In addition to discriminating against kidney failure patients, the health plan violated the Medicare Secondary Payer Act, which dictates that Medicare shouldn't pay for services another entity should cover, the company contended.

People with end-stage renal disease are eligible for Medicare even if they're under 65 years old. Under federal law, employer-sponsored health plans must cover workers with kidney failure for 33 months before Medicare becomes the primary payer. More than 550,000 people with kidney failure are enrolled in Medicare, according to data compiled by the Kaiser Family Foundation.

The health plan applied the same coverage rules to all enrollees whether they have ESRD or not, which makes it lawful, the high court decided. Furthermore, there's no definition in the statute for what would constitute inadequate dialysis coverage, Justice Brett Kavanaugh wrote in the opinion.

"Courts would be entirely at sea in trying to determine an appropriate benchmark or comparator for outpatient dialysis. Put simply, DaVita's approach is a prescription for judicial and administrative chaos, and further demonstrates that DaVita's disparate impact theory is not a correct interpretation of the statute," Kavanaugh wrote.

Justices Elena Kagan and Sonia Sotomayor dissented, writing that outpatient dialysis is an "almost perfect proxy" for ESRD, and therefore not adequately covering dialysis is discriminatory. According to a brief DaVita filed to the Supreme Court, 99.5% of its outpatient dialysis patients have or develop end-stage renal disease.

"A reimbursement limit for outpatient dialysis is in reality a reimbursement limit for people with end-stage renal disease. And so a plan singling out dialysis for disfavored coverage 'differentiate[s] in the benefits it provides between individuals having end-stage renal disease and other individuals,'" Kagan wrote. "A tax on yarmulkes remains a tax on Jews, even if friends of other faiths might occasionally don one at a Bar Mitzvah," she wrote.

DaVita is disappointed with the decision, which limits coverage options for people with kidney failure, a spokesperson wrote in an email. "Dialysis patients deserve better, and we'll continue to advocate for patient choice in care and coverage," the spokesperson wrote.

Marietta Hospital Health Benefit Plan didn't respond to an interview request.

The federal government sided with the health plan in an amicus brief filed in December, even though the ruling may increase Medicare spending. Medicare law doesn't prevent group health plans from limiting dialysis benefits. The provision that prohibits differentiated benefits only applies when plans offer one set of benefits to kidney failure patients and another to those without the disease, the government's brief says.

Congress enacted anti-differentiation rules because lawmakers wanted people to be able to keep their coverage and not feel immediately pushed to Medicare, said Amy Bilton, co-managing shareholder at the the law firm Nyhan Bambrick Kinzie & Lowry. The decision will drive more end-stage renal disease patients to enroll in Medicare or Medicare Advantage, she said.

The decision also offers insight into how justices may view other disability or human rights cases, Bilton said. In addition, it opens the door for group health plans to exclude other types of pricey care that only impact certain categories of patients, such as people who use prosthetics, Bilton said.

"They're going to find some similarities, with maybe certain diagnoses where there's a very expensive treatment that's related, and they're gonna figure out how to exclude from coverage those things," Bilton said.

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