Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc.
The Supreme Court ruled that a hospital employee health plan did not violate the Medicare Secondary Payer statute by offering low reimbursement rates for outpatient dialysis, because the plan applied those same terms to every member — regardless of whether they had kidney disease.
The decision means dialysis providers cannot use the Medicare billing law to force health plans to pay more for kidney treatment by pointing to the law's unequal real-world effects on kidney patients, as long as the plan's written terms treat everyone the same.
How it got here: A federal district court dismissed DaVita's lawsuit; the Sixth Circuit reversed in a divided ruling; the Supreme Court granted review to resolve a split between the Sixth and Ninth Circuits.
The Case in Depth
What happened
Marietta Memorial Hospital's employee health plan paid relatively low rates for outpatient dialysis but applied those rates to every member equally. DaVita, one of the two dominant dialysis companies in the United States, sued the plan under the Medicare Secondary Payer statute — a federal law designed to stop health plans from dumping the cost of kidney-disease treatment onto Medicare by shortchanging people with end-stage renal disease. DaVita argued the plan's stingy dialysis coverage effectively targeted kidney patients, even if written in neutral terms.
The question before the Court
Can a group health plan escape liability under the Medicare kidney-disease billing law by capping dialysis coverage for all members uniformly, even though dialysis patients are almost exclusively people with end-stage kidney disease?
The Court's answer
No. A health plan that applies the same dialysis coverage limits to every member does not violate the Medicare Secondary Payer statute, even if those limits fall disproportionately hard on people with end-stage renal disease. The statute's anti-differentiation rule asks only whether the plan provides different benefits to people with kidney disease than to others. When the terms are identical for everyone, there is nothing to differentiate — and the analysis stops there.
The Court also rejected DaVita's "disparate-impact" theory — the idea that uniform rules producing unequal outcomes for kidney patients are still unlawful. The statute's text focuses on whether a plan draws distinctions between groups, not on what effects a neutral rule happens to produce. The Court further noted that a disparate-impact approach would be unworkable because neither the statute nor DaVita supplied any benchmark for what counts as "adequate" dialysis coverage. This statute coordinates who pays first between private insurance and Medicare; it does not set minimum benefit levels.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Employer-sponsored health plans can set low reimbursement rates for outpatient dialysis — one of the most expensive recurring treatments in medicine — without running afoul of the Medicare billing statute, so long as the same rates apply to all members. Dialysis providers like DaVita, which depend heavily on commercial insurance payments that typically exceed Medicare rates, lose a key legal tool for challenging such limits.
What changes now
The case is sent back to the lower courts for further proceedings under the Supreme Court's ruling. The Marietta Plan's uniform dialysis coverage terms are cleared under the Medicare Secondary Payer statute. DaVita and other dialysis providers lose the ability to use this statute to challenge uniformly applied benefit limits, no matter how heavily those limits affect kidney patients. If Congress wants to require health plans to provide minimum dialysis benefits, it would need to pass new legislation to do so.
What this does not decide
The ruling does not decide whether Congress could or should require health plans to cover dialysis at a specific minimum level. It also does not address whether a plan designed with the deliberate purpose of discouraging enrollment by kidney patients might run afoul of other laws, such as the Americans with Disabilities Act or the Affordable Care Act.
Concurrences and dissents
Dissent in part — Justice Kagan
Justice Kagan agreed with the majority that the statute does not create disparate-impact liability and that the plan does not impermissibly 'take into account' Medicare eligibility. But she parted ways on what she called the 'proxy' theory: because outpatient dialysis is used by nearly 100% of people with end-stage renal disease and almost no one else, limiting dialysis coverage is functionally identical to limiting coverage for people with kidney disease. She argued the statute's text — which bars differentiation based on 'the need for renal dialysis' — expressly covers this kind of indirect targeting, and that the majority's ruling allows plans to accomplish through treatment limits exactly what Congress forbade them from doing directly.
How the Court got there
The legal reasoning, step by step
- The statute's anti-differentiation rule (42 U.S.C. §1395y(b)(1)(C)(ii)) prohibits a health plan from providing different benefits to members with end-stage renal disease than to members without it. The Court started there: if a plan's terms are identical for everyone, the differentiation inquiry ends immediately — no violation is possible.
- Because the Marietta Plan's outpatient dialysis coverage terms applied the same way to all members regardless of whether they had kidney disease, the plan did not 'differentiate in the benefits it provides between individuals' with and without end-stage renal disease. DaVita did not even dispute that the terms were facially uniform.
- DaVita argued for a disparate-impact theory — meaning a neutral plan rule that hits kidney patients harder than others should still be illegal under the statute. The Court rejected this as unsupported by the statutory text, which asks whether a plan treats two groups differently, not whether a uniform rule produces unequal outcomes.
- The Court added a practical dimension: a disparate-impact approach would be impossible to administer because there is no benchmark in the statute, the regulations, or DaVita's own argument for what level of dialysis reimbursement qualifies as 'adequate.' Courts would have no neutral standard for comparing dialysis coverage against coverage for other services.
- The statute is a payment-coordination statute — its purpose is to decide whether private insurance or Medicare pays first — not a traditional antidiscrimination law requiring plans to reach any particular benefit level. Congress knew how to write benefit-mandate laws and did not do so here.
- DaVita's separate 'take into account' argument (that limiting dialysis is effectively accounting for a member's Medicare eligibility) failed for the same reason: because the plan provided identical dialysis benefits to all members regardless of their Medicare status, the plan could not be said to 'take into account' Medicare eligibility at all.