Opinion ID: 4576558
Heading Depth: 3
Heading Rank: 3

Heading: MSPA Discrimination

Text: Arriving to the merits of Counts II and VII, the basic question is whether the MSPA prohibits primary plans from discriminating against individuals with ESRD without expressly stating that these individuals will be treated differently. If the answer is yes, then DaVita has plausibly alleged two ERISA violations. First, if the defendants discriminated against Patient A in violation of federal law (i.e., the MSPA), then DaVita, as Patient A’s assignee, is entitled to unpaid benefits under ERISA flowing from this violation. See 29 U.S.C. § 1132(a)(1)(B); R. 1 (Compl. ¶¶ 66–67, 70) (Page ID #22–24). Second, if the defendants “establish[ed] rules for eligibility . . . of any individual to enroll under the terms of the [group health] plan” based on an 14The Plan’s allegedly singling out dialysis treatments corresponds with two of the regulations’ examples. Example 2 contemplates the following scenario: a “group health plan has a $500 deductible on all benefits for participants covered under the plan” and a participant files “a claim for the treatment of AIDS.” 29 C.F.R. § 2590.702(b)(2)(i)(D) (Example 2). The plan’s corporate board “discuss[es]” the claim; “[s]hortly thereafter, the plan is modified to impose a $2,000 deductible on benefits for the treatment of AIDS, effective before the beginning of the next plan year.” Id. The regulations “[c]onclu[de]” that the facts of Example 2 “strongly suggest that the plan modification is directed at [the participant] based on [the participant’s AIDS] claim.” Id. Here, DaVita contends that Defendants’ limiting dialysis reimbursements across the board may be driven by the Plan’s “incentive to unload ESRD patients whose chronic illness costs the plan more than their other enrollees.” R. 1 (Compl. ¶ 40) (Page ID #14). Discovery may yield evidence of Defendants’ motive for instituting unique reimbursement terms for dialysis services. DaVita’s allegations also align with the facts of Example 5. This example presents a scenario where a group health plan that “applies a $2 million lifetime limit on all benefits” reduces the limit “to $10,000 for any participant or beneficiary covered under the plan who has a congenital heart defect.” Id. (Example 5). Again, the regulations “conclud[e]” that this would violate § 1182 because “[the] benefits under the plan are not uniformly available to all similarly situated individuals and the plan’s lifetime limit on benefits does not apply uniformly to all similarly situated individuals.” Id. Here, the Plan does not explicitly single out persons with ESRD. But, as we explain in greater detail in Section C., infra, DaVita plausibly alleges that “all, or virtually all, of the enrollees who are affected by this discriminatory provision are Plan members suffering from ESRD.” R. 1 (Compl. ¶ 28) (Page ID #9–10). Essentially, DaVita complains that the Plan operates like the problematic plan described in Example 5. The concurrence skips over Examples 2 and 5 and turns to Example 4 for the proposition that “[t]he regulation addressing this section . . . expressly permits uniform limitations on benefits for certain diseases.” Concurring Op. at 54. Example 4 provides that a group health plan’s placing a “$2,000 lifetime limit for treatment of temporomandibular joint syndrome (TMJ)” that is “applied uniformly to all similarly situated individuals and is not directed at individual participants or beneficiaries” does “not violate paragraph (b)(2)(i).” 29 C.F.R. § 2590.702(b)(2)(i)(D) (Example 4). The present case is distinct because DaVita claims that the dialysis reimbursement rates are directed at individual beneficiaries with ESRD and that the Plan’s benefits do not uniformly apply to similarly situated individuals because the dialysis services reimbursement rates affect only those with ESRD. See R. 1 (Compl. ¶ 52) (Page ID #18). To the extent that Example 4 conflicts with Examples 2 and 5, Example 4 should not be followed. No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 25 array of “health status-related factors,” then they violated § 1182(a)(1) of ERISA, and § 1132(a)(3) provides a private right of action to “enjoin any act or practice which violates any provision of this subchapter,” 29 U.S.C. § 1132(a)(3). We hold that the MSPA’s antidiscrimination provisions prohibit conduct beyond the express differential treatment of individuals with ESRD. First, as to the non-differentiation provision of the MSPA, its plain text prohibits both express anti-ESRD discrimination based on an individual’s ESRD status and indirect anti-ESRD discrimination based on an individual’s ESRD-specific need for renal dialysis or based on any other factor. Second, as to the take-intoaccount provision, the meaning of “take into account” is ambiguous, but the relevant regulations support DaVita’s theory of discrimination for the same reasons that it states a violation of the non-differentiation provision. In short, a plan may be engaging in unlawful discrimination against individuals with ESRD even if it does not explicitly single these individuals out for differential treatment.
Paragraph (1)(C)(ii) of the MSPA states that a group health plan “may not differentiate in the benefits it provides between individuals having end stage renal disease and other individuals covered by such plan on the basis of the existence of end stage renal disease, the need for renal dialysis, or in any other manner.” 42 U.S.C. § 1395y(b)(1)(C)(ii). The provision thus specifies three different ways in which a plan may unlawfully discriminate against individuals with ESRD. The first is by explicitly fashioning differential benefits for ESRD patients by virtue of them having ESRD. If, for example, the Plan included a provision that all treatments required by Plan participants who had ESRD were considered out-of-network, this would single ESRD patients out based on the “existence” of their ESRD diagnosis. Id. The second and third types of anti-ESRD discrimination are at issue here. The second is the differential treatment of ESRD patients based on their “need for renal dialysis.” As DaVita explains, “need” includes these patients’ need for the treatment compared to those who do not need it at all, and their need compared to those who do need it, just to a lesser degree. First, DaVita plausibly alleges that dialysis is “needed almost exclusively by ESRD patients.” No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 26 Appellant Br. at 41. That is, in a pie chart of dialysis-users, ESRD-diagnosed individuals would take up almost the full pie. See R. 1 (Compl. ¶ 20) (Page ID #7) (“[N]early all enrollees of the Plan who require or will require dialysis are individuals with ESRD who need such treatment to sustain life.”). Moreover, DaVita explains—without objection by the defendants—that individuals with ESRD “need” dialysis with far greater frequency than the rare, non-ESRD users of dialysis do. Compare Appellant Br. at 8 (“[T]he majority of ESRD patients rely on regular dialysis treatments from the time they are diagnosed with ESRD for the rest of their lives.”), with Reply Br. at 14 n.5 (“The few dialysis patients who do not have ESRD typically suffer from acute kidney injury (‘AKI’) and require dialysis for, at most, a period of weeks (as opposed to years).”). The defendants do not counter with their own explanation of what the “need for renal dialysis” means. The third prohibited basis of anti-ESRD discrimination is the differential treatment of ESRD patients “in any other manner” not covered by the prior two bases. That is, besides engaging in anti-ESRD discrimination by explicitly carving out a different set of benefits for those with ESRD or by targeting these individuals based on their more common and/or frequent need for renal dialysis, a primary plan may not engage in such discrimination through any other means. In DaVita’s view, “[t]he catch-all phrase ‘or in any other manner’ cautions plans against creative devices that have the effect of such illegal differentiation.” Appellant Br. at 42. Again, the defendants offer no competing definition for this type of prohibited discrimination. Both of these bases support DaVita’s theory of how the Plan discriminated against Patient A in violation of the MSPA and ERISA. As to the second basis, DaVita has plausibly alleged that a principal, distinguishing feature of being diagnosed with ESRD is one’s significant need for renal dialysis. Thus, the Plan discriminates against ESRD patients based on their need for dialysis by targeting the primary treatment that individuals with ESRD (1) need exclusively, with the exception of rare, non-ESRD patients, and (2) need with far greater frequency than those few non-ESRD dialysis-users. MedBen’s primary counterargument to this assertion is that “[t]he Plan unequivocally provides for equal treatment of all dialysis patients in that all outpatient dialysis services for any medical reason are out-of-network.” MedBen Br. at 32. Similarly, before the district court, MedBen focused on the complaint’s reference to “the Plan’s No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 27 general application to ‘dialysis patients, almost all of whom have ESRD,’” implying that DaVita’s failure to allege total overlap between dialysis patients and ESRD patients was fatal. R. 18 (MedBen Mot. to Dismiss at 12) (Page ID #204) (quoting R. 1 (Compl ¶ 55) (Page ID #20)). Yet there are two flaws with this counterargument. First, it addresses only the first basis of unlawful anti-ESRD differentiation set forth in the MSPA, and not the latter two bases. Addressing the lack of explicit discrimination in the Plan based on “the existence of end stage renal disease” is only one-third of the way toward defending the Plan’s legality. Second, and perhaps more fatally, it represents a flawed understanding of antidiscrimination law. It is true that, by targeting a service rather than a diagnosis, the Plan does not explicitly discriminate against individuals with ESRD. As DaVita notes, however, “[a] direct differentiation (or discrimination) claim does not require that the challenged activity affect only the disfavored group and no one else.” Reply Br. at 15. This is a well-established principle in antidiscrimination jurisprudence. Take the Supreme Court’s decision in Lawrence v. Texas, 539 U.S. 558 (2003), for example. The challenged law criminalized sodomy between two persons of the same sex. Id. at 562. Although same-sex partners are not the only class capable of engaging in sodomy, the Court concluded that the overlap between the two made class-based discrimination apparent: “When homosexual conduct is made criminal by the law of the State, that declaration in and of itself is an invitation to subject homosexual persons to discrimination both in the public and in the private spheres.” Id. at 575. Lawrence also invalidated the Court’s prior holding in Bowers v. Hardwick, 478 U.S. 186 (1986), a decision that had upheld the criminalization of sodomy regardless of whether the participants were of the same sex. See Lawrence, 539 U.S. at 575, 578. This reasoning is common in antidiscrimination jurisprudence. See, e.g., Minneapolis Star & Tribune Co. v. Minn. Comm’r of Revenue, 460 U.S. 575, 581 (1983) (rejecting the argument that Minnesota’s use tax on paper and ink was “part of the general scheme of taxation,” and concluding that the tax singled out the press for differential treatment); Bray v. Alexandria Women’s Health Clinic, 506 U.S. 263, 270 (1993) (“A tax on wearing yarmulkes is a tax on Jews.”). Thus, if discovery in this case reveals that there is, in fact, a “near-perfect overlap between ESRD patients and dialysis patients,” Reply Br. at 14, a jury could No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 28 reasonably conclude that discrimination against the latter constitutes discrimination against the former. Alternatively, the catch-all provision could support a disparate-impact claim against the Plan. That is, even if the Plan has not directly targeted ESRD patients by differentially treating the service they need far more than anyone else, it may have devised a reimbursement system that has the effect of singling out ESRD patients. The defendants argue that the nondifferentiation provision does not permit proof through a disparate-impact theory, but they do so through analyzing the implementing regulations, rather than engaging with the text of the statute and Supreme Court caselaw suggesting that it supports disparate-impact liability.15 In Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015), the Court considered a provision of the Fair Housing Act (“FHA”) that made it unlawful [t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin. Id. at 533 (quoting 42 U.S.C. § 3604(a)). The case centered on the meaning of “otherwise make unavailable[,]” which the Court determined was “equivalent in function and purpose” to the phrase “otherwise adversely affect” found in both Title VII of the Civil Rights Act (“Title VII”) and the Age Discrimination In Employment Act (“ADEA”), id. at 533–34.16 Because “[i]n these three statutes the operative text looks to results,” the Court held that “otherwise make unavailable”—like the phrase “otherwise adversely affect”—“refers to the consequences of an action rather than the actor’s intent” and “encompasses disparate-impact claims.” Id. at 534. 15Thedistrict court similarly dismissed the disparate-impact argument based on its focus on one subsection of 42 C.F.R. § 411.161(c), without explaining how the MSPA does not “contain th[e] type of ‘results-oriented’ language” of Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015). See DaVita, 2019 WL 4574500, at . 16The Supreme Court held that the phrase “otherwise adversely affect” confers a disparate-impact cause of action in earlier cases. See Griggs v. Duke Power Co., 401 U.S. 424, 426 n.1 (1971) (Title VII); Smith v. City of Jackson, 544 U.S. 228, 234–36 (2005) (ADEA). No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 29 As DaVita explains, see Appellant Br. at 47, there are at least two parallels between the provision at issue in Inclusive Communities and the one at issue here. First, the phrase appears at the end of a series of other prohibitions that deal with disparate treatment, counseling in favor of it meaning something different from these other phrases. See Inclusive Communities, 576 U.S. at 534–35 (identifying the “relevant statutory phrases” in the FHA, Title VII, and the ADEA as “[l]ocated at the end of lengthy sentences that begin with prohibitions on disparate treatment”); see also Appellant Br. at 42 (“[F]or these last two phrases to have any meaning, they must be read as expanding the prohibition beyond explicit discrimination against ESRD patients.”). Second, like the phrase “otherwise make unavailable,” the phrase “in any other manner” is exceedingly broad, sweeping in less blatant forms of discrimination. See Inclusive Communities, 576 U.S. at 534–35 (concluding that the “relevant statutory phrases” in the FHA, Title VII, and the ADEA “serve as catchall phrases looking to consequences, not intent”); see also Appellant Br. at 47. Moreover, the Inclusive Communities Court determined that the word “otherwise” means “‘in a different way or manner,’ thus signaling a shift in emphasis from an actor’s intent to the consequences of his actions.” Inclusive Communities, 576 U.S. at 535 (quoting Webster’s Third New International Dictionary 1598 (1971)) (emphasis added). That “in any other manner” in the MSPA is nearly identical to the Supreme Court’s definition of “otherwise” in Inclusive Communities further reinforces that the non-differentiation provision permits a disparate impact claim. MedBen’s principal response is that the implementing regulations for the nondifferentiation provision foreclose both of DaVita’s theories of discrimination.17 Given the lack of any ambiguity in the statutory text, however, we decline to defer to the implementing 17MedBen also argues that “costs exist under Medicare’s coverage structure for ESRD patients as well,” making it inappropriate “to simply assume . . . that potential exposure to out-of-pocket costs under a private plan serves as an incentive to opt for Medicare.” MedBen Br. at 29. But this argument represents a factual dispute, and at this stage, we assume that all of DaVita’s factual allegations—including DaVita’s allegation that high potential costs for ESRD patients on the Plan incentivize them to switch to Medicare—are true. No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 30 regulations. See Perez v. Postal Police Officers Ass’n, 736 F.3d 736, 740 (6th Cir. 2013).18 (“Our analysis begins with the plain meaning and, if the language is unambiguous, ends there as well.”). And even if we viewed the phrases “need for renal dialysis” and/or “in any other manner” as ambiguous terms for which the agency might supply a reasonable interpretation, our analysis of these regulations, as discussed below, points to the same result. Put simply, the non-differentiation regulations do more to confuse than to clarify, as they appear to conflict with one another. Section 411.161(b)(2) of the Code of Federal Regulations provides examples of unlawful differentiation in plan benefits, including a “[f]ailure to cover routine maintenance dialysis or kidney transplants, when a plan covers other dialysis services or other organ transplants.” 42 C.F.R. § 411.161(b)(2)(v). Routine maintenance dialysis is the exclusive province of ESRD patients; non-ESRD patient uses of dialysis are acute, not routine. See Reply Br. at 20. Thus, limiting benefits for those who rely more frequently on dialysis than others is, per § 411.161(b)(2)(v), unlawful. Yet the next provision in the regulations seems to suggest the opposite. It reads: (c) Uniform Limitations on particular services permissible. A plan is not prohibited from limiting covered utilization of a particular service as long as the limitation applies uniformly to all plan enrollees. For instance, if a plan limits its coverage of renal dialysis sessions to 30 per year for all plan enrollees, the plan would not be differentiating in the benefits it provides between plan enrollees who have ESRD and those who do not. 42 C.F.R. § 411.161(c). This provision, unlike its neighbor, appears to let plans create limitations on benefits that target and/or adversely affect those who rely frequently on dialysis. Capping dialysis sessions at thirty per year would impact all plan participants with ESRD but have zero impact for all or almost all individuals without ESRD, who use dialysis sparingly and for short periods of time—a result this provision seems to endorse. No court has considered the internal conflict between these regulatory provisions. Cf. Dialysis of Des Moines, LLC v. 18Nor do we hinge our analysis on the legislative history of the MSPA. See Isle Royale Boaters Ass’n v. Norton, 330 F.3d 777, 784 (6th Cir. 2003) (“When a statute’s text is unambiguous, there is ordinarily no need to review its legislative history.”). No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 31 Smithfield Foods Healthcare Plan, No. 2:18-CV-653, 2019 WL 8892581, at  (E.D. Va. Aug. 5, 2019) (citing 42 C.F.R. § 411.161(c) without discussion). Yet even if we considered § 411.161(c) in isolation, we could not rely on a provision that conflicts with clear congressional intent. See Moses v. Providence Hosp. & Med. Ctrs., Inc., 561 F.3d 573, 583 (6th Cir. 2009) (“Because the CMS rule is contrary to the plain language of the statute, this Court does not afford it Chevron deference.”). Congress has forbidden primary plans from treating individuals with ESRD differently based on their “need for renal dialysis,” and this regulatory provision permits treating individuals who need dialysis more often (all or almost all of whom have ESRD) worse than individuals who need it less often (none or almost none of whom have ESRD). This plainly conflicts with the text of the MSPA, not to mention the other provisions of the same implementing regulation, see 42 C.F.R. § 411.161(b)(1), (b)(2)(v). For these reasons, DaVita has plausibly alleged that the Plan violates the nondifferentiation provision of the MSPA, resulting in a denial of benefits and unlawful discrimination under ERISA.
Similar reasoning extends to DaVita’s claim that the Plan violates the take-into-account provision of the MSPA. As a reminder, this provision states that a group health plan “may not take into account that an individual is entitled to or eligible for [Medicare benefits due to ESRD]” during the thirty-month period when the plan is primary to Medicare. 42 U.S.C. § 1395y(b)(1)(C)(i). The statute itself does not define what “take into account” means. DaVita argues that to take something into account means to consider or think of it, which means that plans are prohibited from adopting policies that are motivated by a desire to treat Medicareentitled individuals differently. See Appellant Br. at 51–52. In DaVita’s view, discovery may reveal evidence of the defendants’ illicit motive. Id. at 52. The defendants do not directly address why DaVita’s motive-based definition of “take into account” is incorrect. Instead, they argue that “take into account” speaks to a plan’s terms, which, in their view, were nondiscriminatory. See MedBen Br. at 39 (“Because all plan beneficiaries who use outpatient dialysis services, regardless of their diagnosis or condition and including those ESRD patients No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 32 who are eligible for Medicare, are subject to out-of-network reimbursement rates, the Plan does not violate the MSPA’s ‘take into account’ prohibition.”). Because “take into account” appears susceptible to these conflicting meanings, it is ambiguous. See Brilliance Audio, Inc. v. Haights Cross Commc’ns, Inc., 474 F.3d 365, 372 (6th Cir. 2007) (“As both parties have laid out plausible readings of the statutory language, we find that the language of § 109(b)(1)(A) is not unambiguous.”). We thus consider whether the agency has construed this term, and if so, whether its construction is permissible. See Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984); Bio-Med, 656 F.3d at 282 (deferring to 42 C.F.R. § 411.108’s “reasonable interpretation” of the “take into account” clause). Section 411.108 of the Code of Federal Regulations sets forth a nonexclusive list of “[e]xamples of actions that constitute ‘taking into account’” that a person is entitled to Medicare on the basis of ESRD, age, or disability. 42 C.F.R. § 411.108(a). At least two of § 411.108’s illustrations buoy DaVita’s motive-based interpretation of the ambiguous statutory phrase: “taking into account” includes “denying or terminating coverage because an individual is entitled to Medicare on the basis of disability without denying or terminating coverage for similarly situated individuals who are not entitled to Medicare on the basis of disability[,]” id. § 411.108(a)(4) or “[i]mposing limitations on benefits for a Medicare entitled individual that do not apply to others enrolled in the plan, such as providing less comprehensive health care coverage, excluding benefits, reducing benefits, charging higher deductibles or coinsurance, providing for lower annual or lifetime benefit limits, or more restrictive pre-existing illness limitations[,]” id. § 411.108(a)(5). These two examples support DaVita’s theory of discrimination for the same reasons discussed above in Part III.C.1.19 DaVita’s central allegation in this case is that ESRD patients, who are, by law, “Medicare[-]entitled individuals,” id., are singled out for differential treatment because their costs are expensive and could be shifted to Medicare. If DaVita shows, through discovery, a “near-perfect overlap” between Medicare-entitled patients (via ESRD diagnosis) and dialysis patients, Reply Br. at 14, then it may show that, compared to other Plan enrollees, Medicare-entitled individuals are subject to 19Our holding does not preclude a disparate impact view of the take-into-account clause. No. 19-4039 DaVita, Inc. et al. v. Marietta Mem. Hosp. et al. Page 33 reduced benefits. For these reasons, DaVita has plausibly alleged a violation of the “take into account” provision of the MSPA for purposes of its ERISA claims.