“Confirmed Judges, Confirmed Fears” is a blog series documenting the harmful impact of President Trump’s judges on Americans’ rights and liberties. Cases in the series can be found by issue and by judge at this link.
Trump Sixth Circuit judge Eric Murphy argued in dissent that the court should affirm the dismissal of a lawsuit contending that a health plan was improperly discriminating against people with end stage renal disease (ESRD) requiring dialysis by targeting such people with very low reimbursement rates. The majority rejected Murphy’s claims, reversed the lower court, and allowed the lawsuit to proceed in its October 2020 decision in DaVita Inc. v. Marietta Mem. Hosp. Emp. Health Ben. Plan.
DaVita, a leading provider of dialysis treatment, has been providing such treatment since 2017 to Patient A, an anonymous person who has ESRD, an advanced form of kidney failure that can lead to death. Patient A’s health plan, Marietta, was providing reimbursement for the dialysis treatment, as it does for other dialysis treatment, at the “bottom tier” that is less than 88% of the Medicare reimbursement rate, a rate that is “already lower than [the] industry-wide definition of a ‘reasonable and customary’ fee.” DaVita agreed not to bill Patient A for the difference in return for the assignment of any claims by Patient A against Marietta to it; Patient A dropped the Marietta plan and switched to Medicare, and DaVita filed suit against Marietta on behalf of itself and Patient A.
The “crux” of the complaint was that Marietta was discriminating against people with ESRD by offering “inferior benefits” and pushing them to drop coverage under Marietta’s plan and go on Medicare. Among other legal claims, the complaint contended that this constituted discrimination in violation of the Medicare Secondary Payer Act (MSPA) and the Employee Retirement Income Security Act (ERISA), which governed the Marietta plan. The lower court dismissed the complaint as a matter of law without discovery or trial, however, and DaVita appealed.
In a 2-1 decision written by Judge Karen Nelson Moore, the Sixth Circuit ruled that the lower court was wrong as a matter of law, partially reversed its ruling, and sent the case back for DaVita to pursue its discrimination claims. Judge Moore explained that MSPA “prohibits primary plans” like Marietta’s “from discriminating against individuals with ESRD” even though the health plan did not expressly state that they would be treated differently This was because both the “plain text” of the law and relevant regulations make clear that it “prohibits both express anti-ESRD discrimination” based on a person’s status of having ESRD and “indirect” or “disparate impact” discrimination because of a person’s “ESRD-specific need for renal dialysis.” The majority sent the case back to the lower court so that DaVita could pursue discovery and try to demonstrate such discrimination, which would then prove that Patient A was “denied benefits due” under the plan and suffered “unlawful discrimination” under ERISA as well.
Trump judge Murphy dissented. He claimed that the statutory text does not “permit” the “disparate impact theory.” He also maintained that DaVita could not bring a claim under ERISA because it was trying to “invalidate” rather than “enforce” part of the Marietta plan and because it was challenging the provision of a “benefit” rather than “eligibility.”
Judge Moore explained what was wrong with these arguments. The claims about disparate impact, Judge Moore explained, “represent a flawed understanding of antidiscrimination law.” This was because the language of the law, like other antidiscrimination statutes, would clearly permit such a claim and because, if discovery demonstrates a “near-perfect overlap between ESRD patients and dialysis patients,” as DaVita was contending, a jury could “reasonably conclude that discrimination against the latter constitutes discrimination against the former.” She also rejected the “invalidate” vs “enforce” argument, pointing out that the statute and caselaw clearly permit DaVita to seek “equitable relief” to try to “reform” the improper plan and then enforce it. The majority similarly rejected the dissent’s “overly formalistic and novel” claim that the law applies only to a plan’s “rules of eligibility” vs its “covered benefits,” based on the language of the law and its implementing regulations, also noting that a plan’s “benefits provisions” can “operate in a manner that impermissibly affects eligibility”, as in this case.
As a result of the majority decisions, DaVita will have the opportunity to prove that the Marietta plan improperly harmed and discriminated against dialysis providers as well as ESRD sufferers like Patient A, which could be important with respect to other health plans as well. If it had been up to Murphy, however, such discrimination would be perfectly legal.