Court Opinion

ID: 4637097
Source: CourtListenerOpinion
Date Created: 2020-11-25 01:00:24.741147+00
Date Added: 2024-06-11T07:58:38.650498
License: Public Domain

FOR PUBLICATION                             FILED
                   UNITED STATES COURT OF APPEALS                        NOV 24 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                          FOR THE NINTH CIRCUIT

DAVITA INC.,                                   No.   19-35692

               Plaintiff-Appellant,            D.C. No. 2:19-cv-00302-BJR

 v.
                                               OPINION
VIRGINIA MASON MEMORIAL
HOSPITAL, FKA Yakima Valley Memorial
Hospital; YAKIMA VALLEY MEMORIAL
HOSPITAL EMPLOYEE HEALTH CARE
PLAN,

               Defendants-Appellees.

                   Appeal from the United States District Court
                     for the Western District of Washington
                Barbara Jacobs Rothstein, District Judge, Presiding

                     Argued and Submitted October 8, 2020
                             Seattle, Washington

Before: Susan P. Graber and William A. Fletcher, Circuit Judges, and Leslie E.
Kobayashi,* District Judge.

                            Opinion by Judge Graber

GRABER, Circuit Judge:

      *
              The Honorable Leslie E. Kobayashi, United States District Judge for
the District of Hawaii, sitting by designation.
      Defendant Virginia Mason Memorial Hospital administers its own group

health plan, Defendant Yakima Valley Memorial Hospital’s Employee Health Care

Plan ("Virginia Mason's Plan" or "the Plan"). Among its many provisions, the Plan

authorizes payments to providers of dialysis, a critical treatment for persons with

end-stage renal disease ("ESRD"). Persons with ESRD become eligible for

Medicare after three months of dialysis treatment, even if not otherwise eligible for

Medicare. When, as here, both Medicare and another insurer have independent

obligations to pay for a service such as dialysis, Congress—in the Medicare as

Secondary Payer provisions ("MSP"), 42 U.S.C. § 1395y(b)—has decreed who

pays first and who pays second. The MSP also imposes substantive requirements

on group health plans, including by forbidding plans from taking into account an

ESRD patient’s eligibility for Medicare during the first thirty months of Medicare

eligibility. Id. § 1395y(b)(1)(C).

      Plaintiff DaVita, Inc., brought this action pursuant to the MSP’s private

cause of action, id. § 1395y(b)(3)(A), which authorizes suit when a plan fails to

make a statutorily compliant primary payment. DaVita provides dialysis treatment

to patients, including a beneficiary of Virginia Mason’s Plan known as "Patient 1."

DaVita alleges that Defendants reduced the payment amount for Patient 1’s

dialysis because of Medicare eligibility as soon as Patient 1 became eligible for

Medicare, without waiting the mandatory thirty months. But the reduced payment

                                          2
amount remained greater than the Medicare rate, so Medicare never made any

secondary payments. The district court dismissed the complaint, holding that the

MSP’s private cause of action is available only when Medicare has made a

payment.

      Reviewing de novo and taking the allegations in the complaint as true,

Daewoo Elecs. Am., Inc. v. Opta Corp., 875 F.3d 1241, 1246 (9th Cir. 2017), we

hold that dismissal of the complaint on that ground was erroneous. The statutory

text, congressional purpose, and regulatory clues make clear that Congress did not

intend payment by Medicare to be a prerequisite to bringing a private cause of

action under the MSP. The private cause of action encompasses situations in

which a primary plan impermissibly takes Medicare eligibility into account too

soon, even if Medicare has not made any payments. Accordingly, we vacate in

large part and remand for further proceedings.

                                 BACKGROUND

      A.     ESRD and Medicare

      More than 700,000 people in the United States have ESRD, also known as

kidney failure. To survive, a person with ESRD requires either a kidney transplant

or routine maintenance dialysis. 42 C.F.R. § 406.13(b); see also Kidney Disease

Statistics for the United States, Nat’l Insts. of Health (December 2016),

https://www.niddk.nih.gov/health-information/health-statistics/kidney-disease.

                                          3
Dialysis acts as a substitute for a functioning kidney. The most common form of

dialysis for persons with ESRD is hemodialysis. Id. As described by DaVita,

during hemodialysis, "[a] dialysis machine removes blood from the body, filters it

through an artificial kidney, and then returns the cleaned blood." "Traditional, in-

center dialysis is administered to a patient three times a week for about four hours

each session." Most persons with ESRD never receive a kidney transplant, so they

receive regular dialysis for the remainder of their lives. Dialysis is expensive,

costing tens of billions of dollars annually in the United States.

      Congress responded to the critical need for dialysis and the high cost of

treatment. When Congress created Medicare in 1965, the program encompassed

only two categories of eligibility: age and disability. 42 U.S.C. § 426 (1965). But

many persons with ESRD did not qualify for Medicare and could not afford

dialysis on their own. In 1972, Congress expanded Medicare by making all

persons diagnosed with ESRD eligible for Medicare, regardless of age or

disability. 42 U.S.C. § 426-1. A person diagnosed with ESRD becomes eligible

for Medicare three months after first beginning regular maintenance dialysis (or

sometimes sooner if the person receives a kidney transplant). Id. § 426-1(b).

      Medicare is not, of course, the sole provider of healthcare benefits. Many

other sources—such as worker’s compensation programs, tort-liability insurers,

and group health plans—also provide healthcare benefits. When a patient is

                                           4
covered by more than one program, which program must pay first can be a

significant question.

      Congress has allocated primary-payer responsibility between Medicare and

other insurers through the MSP. For the 30 months following an individual’s

Medicare eligibility due to ESRD, a group health plan may not "take into account"

the person’s eligibility for Medicare. Id. § 1395y(b)(1)(C)(i). Following that 30-

month period (33 months after treatment began), a group health plan may begin

"paying benefits secondary to" Medicare. Id. § 1395y(b)(1)(C). In sum, for a

person with ESRD who is covered by a group health plan, the plan is the sole payer

during the first 3 months of dialysis; the plan is the primary payer and Medicare is

the secondary payer during the 30-month coordination period; and the plan may be

the secondary payer thereafter.

      B.     Factual and Procedural History

      Virginia Mason operates a nonprofit hospital in Yakima, Washington. Many

hospital employees are eligible to enroll in Virginia Mason’s Plan, which is an

"employee benefit plan" within the meaning of the Employee Retirement Income

Security Act of 1974 ("ERISA").

      Virginia Mason’s Plan provides varying rates of reimbursement for benefits

depending on whether the beneficiary visits an "in-network" provider or an "out-

of-network" provider. The Plan has a separate provision pertaining to

                                          5
reimbursement for dialysis. In many circumstances, the Plan pays for dialysis

services the same way it pays for all other covered services: "at applicable

network or negotiated fee at in-network and out-of-network benefit levels." But

"[o]nce the member becomes, or is eligible to become, qualified for Medicare

coverage for ESRD and Medicare becomes or is eligible to become the secondary

payer for ESRD services, the Plan will pay claims for ESRD services at 125% of

the then current Medicare allowable [rate] for ESRD Services." DaVita alleges

that, although the special reimbursement rate is higher than Medicare’s

reimbursement rate, the special reimbursement rate is significantly lower than the

ordinary rates paid to both in-network and out-of-network providers.

      Patient 1, a beneficiary of Virginia Mason’s Plan who has ESRD, received

regular dialysis treatment from DaVita. For the first three months of treatment,

when Patient 1 had not yet become eligible for Medicare, DaVita received

"appropriate reimbursement" from the Plan’s third-party claims administrator. But

beginning in the fourth month of treatment, when Patient 1 first became eligible for

Medicare due to ESRD and when Medicare became the secondary payer, the Plan

reimbursed DaVita at the special reimbursement rate described above. The Plan

paid that lower rate for 20 months. DaVita alleges that Patient 1 then "switched

from the Plan to Medicare for primary coverage for dialysis treatments," and the

Plan apparently ceased all payments to DaVita.

                                         6
      DaVita brought this action, asserting a single claim pursuant to 42 U.S.C.

§ 1395y(b)(3)(A). DaVita alleges in part that, by immediately taking into account

Patient 1’s eligibility for Medicare, the Plan’s ESRD-specific program violates the

MSP’s prohibition on taking into account an individual’s eligibility for Medicare,

id. § 1395y(b)(1)(C)(i).

      As noted, the district court ruled that the MSP’s private cause of action

applies only when Medicare has made a payment. Because DaVita did not allege

that Medicare had made a payment, the court dismissed the complaint for failure to

state a claim. DaVita timely appeals.

                                   DISCUSSION

      The parties dispute the scope of the MSP’s private cause of action, 42 U.S.C.

§ 1395y(b)(3)(A). We find it useful to begin, as have other courts, with an

overview of the MSP, in Part A, below. In Part B, we analyze the scope of the

private cause of action, concluding that Congress did not intend payment by

Medicare to be a prerequisite to suit. Finally, in Part C, we apply that holding to

the allegations in this case.

      A.     Overview of the MSP

      The MSP provisions all are found in 42 U.S.C. § 1395y(b). Originally

enacted in 1965, the provisions have expanded considerably in the intervening

decades. We explore three aspects of the MSP’s evolution: (1) its "secondary

                                          7
payer" designation; (2) substantive requirements on group health plans and (3)

enforcement mechanisms.

      1.     Secondary-Payer Designation

      The Medicare as Secondary Payer provisions, as the name suggests,

designate Medicare as the secondary payer in certain circumstances when both

Medicare and a non-Medicare entity have independent duties to pay for a covered

person’s healthcare costs. The MSP itself does not impose a duty to pay on

Medicare or on any other entity. Instead, the MSP "presupposes an existing

obligation (whether by statute or contract) to pay for covered items or services."

Humana Med. Plan v. W. Heritage Ins. Co., 832 F.3d 1229, 1237 (11th Cir. 2016).

Medicare’s duty arises from statutory provisions that govern Medicare. And a

non-Medicare entity’s duty arises from a separate legal source, such as a tort-

insurance policy or a group health plan.

      How the MSP designates Medicare as the secondary payer is less direct than

one might expect; the statute does not contain a straightforward provision that the

non-Medicare entity must pay first and that Medicare must pay second. Instead,

the MSP always has accomplished the same goal through two main clauses. First,

the MSP forbids payment by Medicare when another insurer has paid or is

expected to pay. 42 U.S.C. § 1395y(b)(2)(A); accord, e.g., id. § 1395y(b)(1)

(1984); id. § 1395y(b) (1965). Second, the MSP requires all payments by

                                           8
Medicare to be conditioned on reimbursement whenever Medicare discovers that

another insurer has paid or should have paid. 42 U.S.C. § 1395y(b)(2)(B); accord,

e.g., id. § 1395y(b)(1) (1984); id. § 1395y(b) (1965). Effectively, then, Medicare

is the secondary payer and the other insurer is the primary payer.

      Paragraph (2) of the present-day statutory text is titled "Medicare secondary

payer." 42 U.S.C. § 1395y(b)(2). Subparagraph (2)(A), titled "In general,"

contains the necessary ingredients to accomplish the secondary-payer designation.

Except as provided in subparagraph (2)(B), subparagraph (2)(A) forbids payment

by Medicare when another insurer has paid or is expected to pay. Id.

§ 1395y(b)(2)(A).1 Subparagraph (2)(B) authorizes payments by Medicare in

      1
          Subparagraph (2)(A) states, in full:

               (A) In general

               Payment under this subchapter may not be made, except as
               provided in subparagraph (B), with respect to any item or service
               to the extent that—

               (i) payment has been made, or can reasonably be expected to be
               made, with respect to the item or service as required under
               paragraph (1), or

               (ii) payment has been made or can reasonably be expected to be
               made under a workmen’s compensation law or plan of the United
               States or a State or under an automobile or liability insurance
               policy or plan (including a self-insured plan) or under no fault
               insurance.
                                                                  (continued)

                                            9
certain circumstances, but all payments must be conditioned on reimbursement in

the event that the Secretary of Health and Human Services discovers that another

insurer should have paid. See id. § 1395y(b)(2)(B)(i) ("Authority to make

conditional payment"); id. § 1395y(b)(2)(B)(ii) ("Repayment required").

Accordingly, as we previously have held, subparagraph (2)(A) designates

Medicare the secondary payer and the other insurer the primary payer. See Parra

v. PacifiCare of Ariz., Inc., 715 F.3d 1146, 1152 (9th Cir. 2013) (citing

subparagraph (2)(A) specifically for the conclusion that "[t]he MSP makes

Medicare insurance secondary to any ‘primary plan’ obligated to pay a Medicare

recipient’s medical expenses."); see also Humana, 832 F.3d at 1237 ("Paragraph

(2)(A) alters the priority among already-obligated entities . . . ."); id. (referring to

"the secondary-payer scheme created by paragraph (2)(A)"); Health Ins. Ass'n of

Am., Inc. v. Shalala, 23 F.3d 412, 414 (D.C. Cir. 1994) ("Paragraph (2) . . . makes

             In this subsection, the term “primary plan” means a group health
             plan or large group health plan, to the extent that clause (i)
             applies, and a workmen’s compensation law or plan, an
             automobile or liability insurance policy or plan (including a self-
             insured plan) or no fault insurance, to the extent that clause (ii)
             applies. An entity that engages in a business, trade, or profession
             shall be deemed to have a self-insured plan if it carries its own
             risk (whether by a failure to obtain insurance, or otherwise) in
             whole or in part.
Id. § 1395y(b)(2)(A).

                                           10
Medicare the ‘secondary’ payer . . . ."); accord Mason v. Am. Tobacco Co., 346
F.3d 36, 38 (2d Cir. 2003).

      As originally enacted in 1965, the MSP designated Medicare as the

secondary payer solely with respect to state and federal worker’s compensation

laws and plans. 42 U.S.C. § 1395y(b) (1965). All other insurers, mainly tort-

liability insurers and group health plans, remained off the hook. If Medicare and a

private policy both covered a healthcare expense, the private insurer simply could

decline to pay the expense until Medicare had paid first. The private insurers

would pick up the tab for any remaining costs (provided, of course, that those

additional costs were covered by the private insurance). Bio-Medical Applications

of Tenn., Inc. v. Central States Se. & Sw. Areas Health & Welfare Fund, 656 F.3d
277, 278 (6th Cir. 2011).

      In 1980, Congress responded to that costly arrangement. Congress

expanded the reach of the MSP by designating Medicare as the secondary payer

with respect to tort-liability insurance of all stripes: "an automobile or liability

insurance policy or plan (including a self-insured plan)" and "no fault insurance."

Pub. L. No. 96-499, 94 Stat. 2599 (Dec. 5, 1980); 42 U.S.C. § 1395y(b) (Dec.

1980). In 1981, Congress next designated Medicare as the secondary payer with

respect to group health plans, but only for persons eligible to enroll in Medicare

solely because of ESRD. Pub. L. No. 97-35, 95 Stat. 357 (Aug. 13, 1981); 42

                                           11
U.S.C. § 1395y(b)(2) (Aug. 1981). The next year, Congress extended Medicare's

secondary-payer status with respect to group health plans to encompass some

persons enrolled in Medicare due to age. Pub. L. No. 97-248, 96 Stat. 324 (Sept. 3,

1982); 42 U.S.C. § 1395y(b)(3) (Sept. 1982). And in 1986, Congress added the

third category of Medicare eligibility: disability. Pub. L. No. 99-509, 100 Stat.

1874 (October 21, 1986); 42 U.S.C. § 1395y(b)(4) (Oct. 1986). Thus, by 1986, the

MSP—in its peculiar way—designated Medicare as the secondary payer with

respect to nearly all insurers and nearly all categories of Medicare eligibility.

      2.     Substantive Requirements for Group Health Plans

      With respect to group health plans specifically, Congress went beyond

merely giving Medicare secondary-payer status. Originally, the MSP did not

impose any substantive requirements on group health plans. So far as the MSP

was concerned, insurers were free to craft plan provisions that accounted for

Medicare eligibility or that offered differing treatment to, for example, seniors or

those diagnosed with ESRD. In the late 1980s, Congress enlarged the scope of the

MSP by enacting substantive requirements, generally prohibiting group health

plans from "tak[ing] into account" a person’s Medicare enrollment or eligibility

and from offering differing benefits to working seniors or ESRD patients. Pub. L.

No. 101-239, 103 Stat. 2106 (Dec. 19, 1989); Pub. L. No. 99-509, 100 Stat. 1874

(October 21, 1986).

                                          12
      Those substantive "[r]equirements of group health plans" are now all found

in paragraph (1). Id. § 1395y(b)(1). The first three subparagraphs impose

substantive requirements with respect to the three categories of Medicare

eligibility.2 Subparagraph (1)(A) prohibits most group health plans from taking

into account a beneficiary’s entitlement to Medicare because of age, and it

affirmatively requires plans to provide identical benefits to working seniors as to

others. Id. § 1395y(b)(1)(A). Subparagraph (1)(B) generally prohibits large group

health plans from taking into account a beneficiary’s entitlement to Medicare

because of disability. Id. § 1395y(b)(1)(B). Subparagraph (1)(C), which is most

relevant here, contains two substantive prohibitions with respect to persons who

have ESRD:

      A group health plan (as defined in subparagraph (A)(v))—

      (i) may not take into account that an individual is entitled to or eligible
      for benefits under this subchapter under section 426-1 of this title
      during the [30]-month period which begins with the first month in
      which the individual becomes entitled to benefits under part A under
      the provisions of section 426-1 of this title, or, if earlier, the first month
      in which the individual would have been entitled to benefits under such
      part under the provisions of section 426-1 of this title if the individual
      had filed an application for such benefits; and

      2
         The substantive requirements are subject both to blanket exceptions, such
as for religious orders, 42 U.S.C. § 1395y(b)(1)(D), and to subparagraph-specific
exceptions, such as for small employers with respect to age-based eligibility, id.
§ 1395y(b)(1)(A)(ii). But most of the requirements apply broadly to many group
health plans. Defendants have not claimed that any exception applies here.

                                           13
      (ii) 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[.]
Id. § 1395y(b)(1)(C).

      3.     Enforcement Mechanisms

      Similarly, Congress has strengthened the MSP's enforcement mechanisms

over time. Congress originally incentivized compliance solely through mild tax

consequences. 42 U.S.C. § 162(h) (1981). Beginning in 1984, though, it added a

governmental cause of action, allowing the United States to bring suit to recover its

payments when another insurer should have paid. Pub. L. No. 98-369, 98 Stat. 494

(July 18, 1984). Finally, in 1986, Congress added a private cause of action,

allowing a suit for double damages whenever an insurer failed to pay in accordance

with the MSP’s provisions. Pub. L. No. 99-509, 100 Stat. 1874 (October 21,

1986); 42 U.S.C. § 1395y(b)(5) (1986). In that same enactment, Congress

authorized the government, too, to recover double damages in some circumstances.

Pub. L. No. 99-509, 100 Stat. 1874 (October 21, 1986); 42 U.S.C.

§ 1395y(b)(4)(A)(iii) (Oct. 1986); see also Pub. L. No. 101-239, 103 Stat. 2106

(Dec. 19, 1989) (expanding the scope of the double-damages provision for the

governmental cause of action); 42 U.S.C. § 1395y(b)(2)(B)(ii) (Dec. 1989).

      B.     Analysis

                                         14
        We next consider whether payment by Medicare is a prerequisite to suit

pursuant to the private cause of action, 42 U.S.C. § 1395y(b)(3)(A). We examine

(1) the statutory text, (2) congressional purpose, and (3) regulatory clues.

        1.    Statutory Text

        "We begin, as usual, with the statutory text." Maslenjak v. United States,

137 S. Ct. 1918, 1924 (2017). The "Private Cause of Action" provision states, in

full:

        There is established a private cause of action for damages (which shall
        be in an amount double the amount otherwise provided) in the case of
        a primary plan which fails to provide for primary payment (or
        appropriate reimbursement) in accordance with paragraphs (1) and
        (2)(A).

42 U.S.C. § 1395y(b)(3)(A).

        The cause of action is thus available whenever a primary plan fails to take a

specific action: paying in accordance with two provisions. Nothing in the

statutory text concerns an act or omission by Medicare. Indeed, the text does not

mention Medicare at all; it merely authorizes suit whenever a primary plan fails to

make an appropriate payment. Nor would it have been hard for Congress to

include payment by Medicare as an element. For example, Congress could have

added "when the Secretary has made a conditional payment" or "to recover

payment made under this subchapter." Congress did exactly that in defining the

scope of the government’s cause of action, which begins: "In order to recover

                                          15
payment made under this subchapter for an item or service, the United States may

bring an action . . . ." 42 U.S.C. §1395y(b)(2)(B)(iii) (emphasis added); see

Russello v. United States, 464 U.S. 16, 23 (1983) ("Where Congress includes

particular language in one section of a statute but omits it in another section of the

same Act, it is generally presumed that Congress acts intentionally and purposely

in the disparate inclusion or exclusion." (internal quotation marks and brackets

omitted)). We therefore deem Congress’ omission in § 1395y(b)(3)(A) of a

requirement for Medicare to have paid to be deliberate.

      Defendants nevertheless insist that Congress intended to require payment by

Medicare as a prerequisite to suit. Defendants urge us to infer that prerequisite

from the statutory text authorizing suit whenever a primary plan fails to pay "in

accordance with paragraphs (1) and (2)(A)." 42 U.S.C. § 1395y(b)(3)(A).

According to Defendants, the only way to make sense of the text is to conclude

that Congress intended payment by Medicare as a prerequisite to suit. We

disagree.

      "Determining when a primary plan violates paragraph (1) is easy." Bio-

Medical, 656 F.3d at 285. As we described above, paragraph (1) contains

substantive prohibitions that apply to group health plans. So, in order to pay in

accordance with paragraph (1), a group health plan must not violate those

prohibitions. For example, pertinent here, subparagraph (1)(C) bars a group health

                                          16
plan from taking into account Medicare eligibility due to ESRD. A payment by a

group health plan that took into account a person’s eligibility for Medicare due to

ESRD would not be in accordance with paragraph (1). Nothing about

§ 1395y(b)(3)(A)’s reference to paragraph (1) suggests that Medicare must pay.

      Defendants direct us instead to the provision’s reference to a plan’s failure to

pay in accord with subparagraph (2)(A). That provision forbids Medicare from

making payments when another plan has paid or is expected to pay; at first glance,

it does not affirmatively direct primary plans to do anything. The Sixth Circuit

aptly summarized:

      How can a primary plan fail to make a payment in accordance with
      subparagraph (2)(A), if that subparagraph only instructs when
      Medicare, and not primary plans, may or may not make payments?

Bio-Medical, 656 F.3d at 286 (emphasis omitted).

      The answer, in our view, is not complicated. As we discussed above, and as

we held in Parra, 715 F.3d at 1152, subparagraph (2)(A) assigns secondary-payer

status to Medicare and therefore necessarily assigns primary-payer status to the

private insurer. Indeed, the original version of the cause-of-action provision made

that implication explicit, referring to the various insurance types, including group

health plans, as having been "made a primary payer" by the predecessor clauses to

current subparagraph (2)(A). 42 U.S.C. § 1395y(b)(5) (Oct. 1986). In other

words, the functional effect of subparagraph (2)(A) on a private insurer is to

                                         17
require the private insurer to be the primary payer. Therefore, a payment in

accordance with subparagraph (2)(A) merely requires payment consistent with the

insurer’s primary-payer status.

      Applying that insight here, any mystery about the scope of the private right

of action falls away. Paragraph (1) imposes substantive requirements on group

health plans, thereby requiring benefit calculations consistent with those

requirements. Subparagraph (2)(A) designates the private insurer, in prescribed

circumstances, as the primary payer, thereby requiring payment before Medicare

has paid (or requiring reimbursement if Medicare has paid already). A plan’s

payment must comport with both the substantive requirements of paragraph (1) and

the primary-payer requirement of subparagraph (2)(A).

      Notably, a plan’s failure to abide by those requirements does not always

cause Medicare to make a conditional payment. If a plan refuses to cover persons

with ESRD, for example, in violation of paragraph (1), then Medicare might make

a payment. But if, as alleged here, a plan violates paragraph (1) yet pays more than

the Medicare rate, then Medicare will not make any additional payments.

      Similarly, if a plan fails to pay consistent with its assigned primary-payer

status—for example, by declining to pay until after Medicare has paid or by paying

an amount that subtracts an amount equal to an expected Medicare payment—then

that failure will not necessarily cause Medicare to make a payment. Indeed,

                                         18
regulations generally forbid Medicare from making payments when a group health

plan has a duty to pay. 42 C.F.R. § 411.165(b); cf. 42 U.S.C. § 1395y(b)(2)(B)(i)

(authorizing conditional payments when a tort-liability insurer is not reasonably

expected to pay).

      In other words, a group health plan’s failure to pay consistent with its

substantive obligations or its failure to pay consistent with its primary-payer status

sometimes results in payment by Medicare and sometimes does not result in

payment by Medicare. But the private cause-of-action provision looks solely to the

group health plan’s actions, not to the downstream effect of those actions.

Whether a "primary plan . . . fails to provide for primary payment (or appropriate

reimbursement) in accordance with" two requirements does not ask whether

Medicare has made a payment. 42 U.S.C. § 1395y(b)(3)(A). In our view, then, the

statutory text does not support Defendants’ argument that Medicare must make a

payment.

      We acknowledge that the only other circuit court to have examined the

pertinent text in detail has reached the opposite conclusion. In a thoughtful

analysis, the Sixth Circuit adopted a different reading of the relevant provision’s

reference to subparagraph (2)(A). DaVita, Inc. v. Marietta Mem'l Hosp. Empl.

Health Benefit Plan, 978 F.3d 326, 337–40 (6th Cir. 2020); Bio-Medical, 656 F.3d

at 284–87. Overlooking the functional effect of subparagraph (2)(A), the court

                                          19
reasoned, instead, that Congress must have intended the reference to subparagraph

(2)(A) to require payment by Medicare. Marietta, 978 F.3d at 337–38; Bio-

Medical, 656 F.3d at 286. According to the Sixth Circuit, "the only way that a

primary plan can fail to act in accordance with [subparagraph (2)(A)] is by failing

to make payments or appropriate reimbursements to a provider and thus triggering

the remission of a conditional payment by Medicare." Marietta, 978 F.3d at 337

(emphasis added).

      We respectfully disagree. As discussed above, a plan’s failure to pay

consistent with its obligations only sometimes triggers payment by Medicare.

Moreover, the statutory provisions concerning conditional payments by Medicare

are found in subparagraph (2)(B), not subparagraph (2)(A). Subparagraph (2)(B) is

titled "Conditional payment"; subparagraph (2)(B)(i) authorizes conditional

payments by Medicare; and subparagraph (2)(B)(ii) requires a primary plan to

make an appropriate reimbursement. If Congress had referenced those statutory

provisions directly in the cause-of-action provision, we might infer a prerequisite

of payment by Medicare. But Congress did not refer to those provisions directly;

instead, it required only that primary plans pay in accordance with paragraphs (1)

and (2)(A). It is true that subparagraph (2)(A) states that Medicare may not make

payments except as provided in subparagraph (2)(B). But if the cause-of-action

provision’s aim were to require a payment by Medicare in order to sue, then why

                                         20
refer to subparagraph (2)(A) at all? The only function that subparagraph (2)(A)

serves with respect to Medicare is to prohibit Medicare payments. We therefore

part ways with the Sixth Circuit’s analysis and conclude, instead, that a private

insurer fails to pay in accord with subparagraph (2)(A) whenever it pays

inconsistently with its primary-payer status. No payment by Medicare is required.

      Returning to the text of the cause-of-action provision, we emphasize a subtle

but important point. The statute authorizes suit whenever a plan "fails to provide

for primary payment (or appropriate reimbursement) in accordance with

paragraphs (1) and (2)(A)." 42 U.S.C. § 1395y(b)(3)(A). The plan must pay in

accord with both requirements (it must pay the same for Medicare enrollees and it

must pay first).3 The two requirements form an obligation on a group health plan

to make a statutorily compliant payment. If the payment does not comply, then the

plan has failed to pay in accordance with that obligation. In other words, as

      3
         The prepositional phrase "in accordance with paragraphs (1) and (2)(A)"
clearly connects to "provide for primary payment," not "fails." Congress placed
the prepositional phrase immediately after the phrase "provide for primary
payment (or appropriate reimbursement)," strongly suggesting that the "in
accordance with" phrase modifies the payment requirement, not the failure. See,
e.g., Barnhart v. Thomas, 540 U.S. 20, 26–27 (2003) (describing and applying the
rule of the last antecedent). Moreover, the meaning of the prepositional phrase
resolves any doubt. One cannot "fail" "in accordance with" something; "in
accordance with" means "in agreement or harmony with" or "in conformity to."
See accordance, Oxford English Dictionary (3d ed. 2011),
https://www.oed.com/view/Entry/1170?redirectedFrom=accordance#eid (last
visited Nov. 13, 2020) (def. 2b ("in accordance with"))

                                         21
explained in more detail below, a failure to pay in accord with two requirements

occurs whenever a payment violates either of the provisions. The private right of

action thus attaches if a plan either fails to pay in accord with paragraph (1) or fails

to pay in accord with subparagraph (2)(A). A plan’s payment need not fail on both

scores; a noncompliant payment, for either reason, triggers the right to sue.

      Formal logic supports that interpretation. Known as one of De Morgan’s

laws, the principle holds that the condition of "not (A and B)" is satisfied if either

"not A" or "not B." Irving M. Copi & Carl Cohen, Introduction to Logic 331–32

(14th ed. 2011); Peter Smith, An Introduction to Formal Logic 61, 100 (2003); see

also R.L. Goodstein, Boolean Algebra 6–7 (Dover ed. 2007). Courts have applied

De Morgan’s laws in interpreting statutes. E.g., Schane v. Int’l Broth. of

Teamsters Union Local No. 710 Pension Fund Pension Plan, 760 F.3d 585, 589–90

(7th Cir. 2014); United States v. One 1973 Rolls Royce, 43 F.3d 794, 814–15 (3d

Cir. 1994). Of course, statutory interpretation is not a rigid mathematical exercise;

when considering De Morgan’s laws, "[c]ontext matters." Schane, 760 F.3d at

590; see generally Lawrence M. Solan, The Language of Judges 45–63 (1993)

(discussing the principles at some length). But the context here decisively

confirms our interpretation.

      The principle is best illustrated by example where, as here, the two clauses

establish separate requirements that govern an action. If a hypothetical statute

                                          22
required payment (1) by the end of the month and (2) by cashier’s check, and the

statute provided that payment will be rejected if the debtor fails to pay in

accordance with paragraphs (1) and (2), no one would contend that a timely

personal check or an untimely cashier’s check must be accepted. Or consider a

hiring statute that (1) bars sex discrimination and (2) bars religious discrimination.

A failure to hire in accord with paragraphs (1) and (2) occurs whenever the

employer engaged in one of those forms of discrimination. No one would contend

that a failure occurs only if the employer engaged in both sex discrimination and

religious discrimination. This understanding also comports with ordinary speech.

If a teacher sternly tells a student to "sit down and be quiet," and threatens

detention if the student fails to sit down and be quiet, the whole class knows that

the student must comply with both instructions to avoid detention. Sitting while

making noise won't cut it.

      The MSP’s private cause-of-action provision operates in the same way.

Paragraph (1) imposes substantive requirements on group health plans, and

subparagraph (2)(A) requires the private insurer to pay first. A plan fails to pay in

accordance with those provisions either by violating the substantive provisions in

paragraph (1) or by failing to pay consistently with its primary-payer status.

      Careful study of the private cause-of-action provision also confirms that

interpretation. This case involves a suit against a group health plan. But the cause-

                                          23
of-action provision also encompasses a tort-liability insurer’s failure to pay. The

provisions of paragraph (1) apply solely to group health plans, so it is impossible

for a tort-liability insurer to "fail" to pay in accordance with paragraph (1). Courts

nevertheless have allowed an action to lie for any failure by a tort-liability insurer

to pay in accordance with subparagraph (2)(A) only. E.g., Mich. Spine & Brain

Surgeons, PLLC v. State Farm Mut. Auto. Ins. Co., 758 F.3d 787, 790–93 (6th Cir.

2014); see Humana, 832 F.3d at 1236–37 (noting that "[p]aragraph (1) regulates

group health plans and is not at issue in this case" and nevertheless holding that "a

primary plan ‘fails to provide for primary payment (or appropriate reimbursement)

in accordance with paragraph[] . . . (2)(A)’" (ellipsis and second alteration by

Humana)); Glover v. Liggett Grp., Inc., 459 F.3d 1304, 1308 (11th Cir. 2006) (per

curiam) (analyzing the cause of action in a tort-based suit by reference solely to

subparagraph (2)(A), and holding that the statute "creates a private cause of action

for double damages ‘in the case of a primary plan which fails to provide for

primary payment (or appropriate reimbursement) in accordance with . . . (2)(A).’"

(ellipsis by Glover) (emphasis omitted) (quoting 42 U.S.C. § 1395y(b)(3)(A))); see

also In re Avandia, 685 F.3d 353, 359 (3d Cir. 2012) (analyzing a private cause of

action brought against a self-insured company without regard to paragraph (1)’s

requirements and holding that the action may be brought notwithstanding the lack

of a violation of paragraph (1)). In other words, for one of the two categories of

                                          24
insurers (tort-liability insurers), a failure to pay in accordance with just one of the

subparagraphs suffices. In our view, Congress clearly intended the same result

with respect to the other category of insurers (group health plans).

      Finally, we note that the Sixth Circuit began its analysis with the opposite

assumption: that the cause of action requires two separate failures, a failure to pay

in accord with paragraph (1) and a failure to pay in accord with subparagraph

(2)(A). Marietta, 978 F.3d at 337; Bio-Medical, 656 F.3d at 285. Because of that

assumption, the Sixth Circuit was unable to make sense of the statute; the court

thus abandoned the approach, determining instead to "consider paragraphs (1) and

(2)(A) collectively, rather than individually." Marietta, 978 F.3d at 337 (quoting

Bio-Medical, 656 F.3d at 286). For the reasons that we have explained above, we

think that Congress intended to permit a private action if an insurer fails to abide

by either obligation.

      In sum, paragraph (1) provides the substantive obligations of a group health

plan, and subparagraph (2)(A) designates a plan as the primary payer in certain

circumstances. Those two provisions, together, create an obligation on a plan to

make a primary payment in some circumstances, and the statute allows suit

whenever a plan fails to meet its obligation in either respect.

      Our interpretation yields a tidy result. For group health plans, paragraph (1)

requires payment according to certain substantive terms, such as not taking into

                                           25
account Medicare eligibility when calculating the payment amount; and

subparagraph (2)(A) merely requires primary payment, that is, payment before

Medicare pays or reimbursement if Medicare already paid. In cases like this one,

where the plan made a primary payment, the plan arguably did not fail to pay in

accordance with subparagraph (2)(A). But the plan’s alleged violation of

paragraph (1) nevertheless gives rise to a claim.

      Similarly, one can imagine the reverse situation, in which the group health

plan’s terms and calculations are proper, but the plan declines to pay on the

improper basis that Medicare must pay first (or the plan waits for Medicare to pay

first and then pays the balance only). In that situation, the plan arguably did not

fail to pay in accordance with paragraph (1), because the plan’s terms and

calculations are proper; but the plan clearly failed to pay in accordance with

subparagraph (2)(A), because it made no payment (or a secondary payment only).

The plan’s violation of subparagraph (2)(A) would give rise to a cause of action.

Similarly, as noted above, a tort-liability insurer cannot fail to pay in accord with

paragraph (1), because it does not apply; but a tort-liability insurer’s refusal to

assume primary-payer status, contrary to subparagraph (2)(A), would give rise to a

cause of action. It may seem implausible today that a plan would blatantly

contradict the MSP by asserting that Medicare must pay first. But we note that, for

                                           26
decades, the sole purpose of the MSP was to require private plans to pay first—a

requirement that insurers resisted and that Congress struggled to enforce.

      Our reading of the cause-of-action provision does not require payment by

Medicare as a prerequisite to suit. In that sense, the reading is broader than a rule

that requires payment by Medicare. But our interpretation is, in at least one way,

more limited than the reading adopted by some courts. E.g., MSP Recovery, LLC

v. Allstate Ins. Co., 835 F.3d 1351, 1358 (11th Cir. 2016). Specifically, our

reading does not convert ordinary billing disputes into MSP claims giving rise to

double damages. If a plan denies payment for any reason other than those reasons

forbidden by paragraphs (1) and (2)(A), then no MSP claim is available. For

example, no MSP claim would be available if the insurer declines to pay because

of a good-faith assertion4 that the beneficiary has reached the plan’s maximum

payments, that the claim is fraudulent, that the beneficiary failed to obtain pre-

approval for a service, that the beneficiary’s coverage had expired, and so on.

Those disputes would require resolution through ordinary ERISA channels or

state-law contract claims. An MSP claim, and its allowance of double damages,

      4
        A bad-faith assertion might require a different result. If a plan raised a
bad-faith defense to mask its violation of the MSP provisions, an MSP action
might be valid. Of course, the plaintiff would have the burden to show that the real
reason for the denial was one of the MSP-forbidden grounds. Cf. Manning v.
Utils. Mut. Ins. Co., 254 F.3d 387, 389–90 (2d Cir. 2001) (reversing the district
court’s dismissal of a claim that the insurer had denied benefits in bad faith).

                                          27
would be available only if the plan declined to pay for a reason forbidden by either

paragraph (1) or (2)(A).

      2.     The Purpose of the Statute

      "In determining a statutory provision’s meaning, we may consider the

purpose of the statute in its entirety, and whether the proposed interpretation would

frustrate or advance that purpose." Brower v. Evans, 257 F.3d 1058, 1065 (9th Cir.

2001) (internal quotation marks omitted). As we explain below, the MSP’s

purpose strongly supports our interpretation of the statutory text.

      There is no dispute that "the overarching statutory purpose" of the MSP

provisions is to "reduc[e] Medicare costs." Zinman v. Shalala, 67 F.3d 841, 845

(9th Cir. 1995). Indeed, until the late 1980s, the sole function of the statutory

provisions was to save Medicare money. Those versions of the MSP contained

only provisions requiring plans to make primary payments, that is, to pay before

Medicare.

      But beginning in the late 1980s, Congress added many provisions that go

well beyond simply requiring plans to make primary payments. Indeed, nearly all

of the provisions in what is now paragraph (1) protect persons from differing

treatment by group health plans. For example, for most persons enrolled in

Medicare—whether due to age, disability, or ESRD—group health plans generally

may not take into account Medicare enrollment and must provide benefits identical

                                          28
to those benefits received by everyone else. 42 U.S.C. § 1395y(b)(1)(A)(i)-(ii) &

(B)(i) & (C)(i). The equal-treatment provisions apply whether or not Medicare

even covers the particular item or service. The broader scope of the MSP

provisions is clearer still with respect to persons diagnosed with ESRD. During

the 30-month coordination period, plans may not take into account Medicare

eligibility, even if the person is not in fact enrolled in Medicare. Id.

§ 1395y(b)(1)(C)(i). Moreover, wholly apart from Medicare enrollment or

eligibility, plans may not offer differing benefits to persons with ESRD. Id.

§ 1395y(b)(1)(C)(ii).

      Those provisions go well beyond protecting the Medicare Trust Fund. If

Congress’ aim were solely to protect the fisc, then Congress could have required

that group health plans not reduce benefits in a way that caused Medicare to pay,

or it could have limited the protections to items or services covered by Medicare.

But Congress did much more: If a beneficiary has a "Cadillac plan," for example,

it must remain a Cadillac plan even if the beneficiary enrolls in Medicare. Plans

must continue coverage of all items and services—even those not covered by

Medicare—despite the fact that coverage of those items and services could not

possibly affect Medicare’s coffers. And plans may not treat persons with ESRD

differently even if they are not enrolled in Medicare. Notably, some persons with

ESRD never go on Medicare, and nearly everyone with ESRD is ineligible for

                                          29
Medicare during their first three months of treatment. 42 U.S.C. § 426-1(b)(1)(A).

Requiring payments by group health plans for persons who are not enrolled in

Medicare also could not affect Medicare’s funds.

      In sum, the purpose of the MSP today is twofold: to protect the fisc and to

provide equal treatment to certain categories of persons. Subparagraph (2)(A)

aims to protect the fisc by assigning primary-payer status to private insurers, and

paragraph (1) contains the equal-treatment provisions. The private cause of action

refers to both provisions. Consideration of congressional purpose thus strongly

supports our interpretation, which gives effect to both congressional purposes—

protecting the fisc and requiring equal treatment. Notably, Defendants’

interpretation advances only one of those purposes, by blessing blatantly unequal

treatment so long as that mistreatment does not directly harm the fisc.5

      5
        Nor does consideration of indirect harm to the fisc aid Defendants. If
private plans greatly reduced benefits to Medicare enrollees but still paid enough to
prevent payment by Medicare, some of those enrollees might drop their private
plans and rely on Medicare alone, thus saving the cost of their premiums but
harming Medicare eventually. Viewed in that light, the equal-treatment provisions
could be said to provide indirect protection for Medicare’s funds. One could
accordingly view the equal-treatment provisions as simply an expression of
Congress’ sole purpose of protecting the fisc, albeit indirectly.

      That line of reasoning fails to account for the equal-treatment provisions that
apply to persons not enrolled in Medicare. But even overlooking that detail, the
argument still fails on its own terms. If the equal-treatment provisions provide
                                                                  (continued)

                                         30
      We acknowledge that some of our sister circuits have taken a narrower view

of the MSP’s purpose, for example, stating that "[t]he sole interest of Congress, as

far as the statute discloses, was to provide that Medicare would not have to pay

ahead of private carriers in certain situations." Baptist Mem’l Hosp. v. Pan Am.

Life Ins. Co., 45 F.3d 992, 998 (6th Cir. 1995) (emphasis added); see also Harris

Corp. v. Humana Health Ins. Co. of Fla., Inc., 253 F.3d 598, 605 (11th Cir. 2001)

(per curiam) ("[T]he MSP statute was designed only to lower Medicare costs.");

Perry v. United Food & Com. Workers Dist. Unions 405 & 442, 64 F.3d 238, 243

(6th Cir. 1995) (stating that Congress enacted the MSP "in order to lower Medicare

costs"); Glatthorn v. Indep. Blue Cross, 34 F. App'x 420, 422 (3d Cir. 2002)

(unpublished) ("Congress enacted the MSP to cut costs in the Medicare

program."). Some decisions also have stated that the private cause-of-action

provision reflects that supposedly sole purpose. See, e.g., Stalley v. Catholic

Health Initiatives, 509 F.3d 517, 524 (8th Cir. 2007) ("[T]he apparent purpose of

the [private cause of action] is to help the government recover conditional

indirect protection of the fisc, then allowing rigorous enforcement of those
provisions (even when there is no direct harm to the fisc) has the effect of
protecting Medicare’s funds. So even if we assume that Congress’ sole concern
was reducing Medicare’s costs, our interpretation nevertheless advances that cause.
In fact, by allowing suit in instances of both direct and indirect threats to Medicare,
our interpretation protects Medicare’s funds better than Defendants’ interpretation
would, because Defendants’ narrow interpretation permits suit only in cases of
direct harm.

                                          31
payments from insurers or other primary payers."); Manning, 254 F.3d at 396

("The history of the MSP legislation is consistent with our view that the private

right of action was created to save money for the Medicare system."); id. at 391–92

("Congress has authorized a private cause of action and double damages against

entities designated as primary payers that fail to pay for medical costs for which

they were responsible, which are borne in fact by Medicare."); Harris Corp., 253
F.3d at 605 n.5 (agreeing with other courts that "the fiscal integrity of the Medicare

program must be in jeopardy in order for the private cause of action to exist");

Perry, 64 F.3d at 243 (stating that when the Medicare "program’s fiscal integrity is

not threatened, . . . the MSP statute does not apply").

      We decline Defendants’ invitation to infer, from Congress’ purportedly

"sole" purpose of protecting the fisc, an intent by Congress to require payment by

Medicare as a prerequisite to bringing a private action. Most fundamentally,

although we agree that protecting the fisc is the MSP’s overarching goal, we

disagree that Congress had no other aims. As described in detail above, many of

the substantive requirements in paragraph (1) go far beyond protecting Medicare’s

funds. None of the cases just cited considered the substantive requirements of

paragraph (1), so it is not surprising that those courts focused on the MSP’s main

objective. We remain convinced that Congress’ purpose was dual: to protect the

fisc and to require equal treatment in some circumstances.

                                          32
      Nor did those decisions, in opining on the scope of the private cause-of-

action provision, examine the provision’s key text, which allows a suit whenever a

primary plan fails to pay "in accordance with paragraphs (1) and (2)(A)." 42

U.S.C. § 1395y(b)(3)(A). As described above, close analysis of that text reveals

no intent by Congress to require payment by Medicare as a prerequisite to private

suit. To the extent that statements in the other cases suggest that we should infer a

requirement that Medicare must make a payment before a private cause of action

arises, we are not persuaded.

      In enacting the MSP, Congress sought to save Medicare money, and it also

sought to require equal treatment by group health plans in some circumstances.

Section 1395y(b)(3)(A) reflects those dual purposes by allowing suit both in

circumstances that threaten Medicare’s funds and in circumstances in which a

group health plan impermissibly treats beneficiaries unequally. Consideration of

congressional purpose thus supports our interpretation of the cause of action.

      3.     Regulatory Clues

      Finally, we consider whether regulatory documents shine any light on the

scope of the private cause of action. We find most illuminating a rulemaking in

1989, found at 54 Fed. Reg. 41,718. In response to a proposed rule on when

Medicare would make payments, some commenters had requested that Medicare

make conditional payments sooner if a primary plan declined to pay. 54 Fed. Reg.

                                         33
41,718. The agency responded that Medicare did not want to assume that financial

burden. The agency noted, as an additional reason for Medicare to decline to pay

earlier, that Congress had created the private cause of action "if a responsible third

party fails to pay primary benefits." Id. In short, the agency stated that, even if

Medicare had not paid, private parties nevertheless could sue. We decline to give

this passage, made in response to comments on a different issue, undue weight.

But it is noteworthy that, from the beginning, the agency interpreted the private

cause of action as not requiring payment by Medicare.

      Defendants’ regulatory citations do not advance the analysis. Title 42

C.F.R. § 411.24(c)(i) defines the damages available in a suit by the government as

limited to the payment made by Medicare. That definition fully accords with the

statutory text of the governmental cause of action, which is limited expressly to

recovery of amounts spent by the government. 42 U.S.C. § 1395y(b)(2)(B)(iii).

The regulation neither mentions the private cause of action nor purports to define

the damages available under the separate statutory provision defining the private

cause of action.

      Defendants’ other two citations, the MSP Manual and 42 C.F.R.

§ 411.161(b)(2), include examples of actions by primary plans that violate the

MSP. Defendants point to a few examples that affect Medicare’s funds. But both

documents contain plenty of examples of nonconformance that do not affect

                                          34
Medicare’s funds, such as a private plan’s charging a beneficiary higher premiums.

MSP Manual, Ch. 1, § 70.4.A; 42 C.F.R. § 411.161(b)(2)(ii). More to the point,

examples of nonconformance do not answer the key question: which types of

nonconformance give rise to a private cause of action.

       In sum, to the extent that the regulatory documents relate to the scope of the

private cause of action, they support our interpretation that payment by Medicare is

not a prerequisite to suit.

       4.     Summary

       The statutory text, congressional purpose, and regulatory clues all point in

the same direction: Congress intended the private cause of action to encompass

suits resulting from statutorily noncompliant payments by primary plans. Payment

by Medicare is not a prerequisite to suit.

       C.     Result in This Case

       For the first 20 months of Patient 1’s eligibility for Medicare due to ESRD,

Patient 1 was a beneficiary of Virginia Mason’s Plan. DaVita alleges that, during

that period, Defendants paid a lower rate for dialysis solely because of Patient 1’s

eligibility for Medicare, in violation of 42 U.S.C. § 1395y(b)(1)(C). The district

court dismissed the complaint with respect to that 20-month period because

Medicare had not made a payment. Because we hold that payment by Medicare is

not a prerequisite to suit, we vacate that portion of the district court’s judgment and

                                             35
remand for further proceedings. We do not reach any of the alternative arguments

raised by the parties. See Golden Gate Hotel Ass'n v. City & Cnty. of San

Francisco, 18 F.3d 1482, 1487 (9th Cir. 1994) ("As a general rule, ‘a federal

appellate court does not consider an issue not passed upon below.’" (quoting

Singleton v. Wulff, 428 U.S. 106, 120 (1976))). On remand, the district court may

address those arguments in the first instance.

      After the first 20 months, Patient 1 dropped his or her coverage under

Virginia Mason’s Plan. Patient 1 ceased to be a beneficiary of Virginia Mason’s

Plan, and Medicare became Patient 1’s primary insurer. The MSP designates

Medicare as the secondary payer for the first 30 months of Medicare eligibility.

Had Patient 1 stayed enrolled in Virginia Mason’s Plan, the Plan would have been

the primary payer for 10 more months. As the district court held, the Plan clearly

was not a "primary plan" during those 10 months, because Patient 1 was not a

beneficiary of the Plan. DaVita’s theory is that it nevertheless may seek damages

for non-payment during those 10 months because, according to DaVita’s briefing

to us, the Plan’s reduced payments during the preceding 20 months caused Patient

1 to drop coverage under the Plan.

      We conclude that the complaint fails to allege causation plausibly. Ashcroft

v. Iqbal, 556 U.S. 662, 678 (2009). If the reduced payments caused Patient 1 to

drop coverage, then Plaintiff could have so alleged. Instead, the complaint only

                                         36
asserts generally that the reduced-payment scheme "incentivizes" persons to drop

coverage, and it alleges that Patient 1 dropped coverage. The complaint fails to tie

those two allegations sufficiently together in any plausible way.

      In the absence of a direct allegation of causation, we do not find the

inference of causation plausible in light of the other allegations. So far as the

complaint alleges, the Plan did not change Patient 1’s benefits in any way other

than the amount that it paid the dialysis provider: no increased premiums,

deductibles, or co-payments, or any other reduction in benefits that would be

obvious to a beneficiary. Indeed, there is no allegation that Patient 1 was even

aware of the reduction in payments from the Plan to the provider. If DaVita had

billed Patient 1 for the balance or threatened to do so, causation might be plausible.

But DaVita has not alleged that it did either one of those things. In other words,

the Plan’s reduced payments for dialysis could have caused Patient 1 to leave the

Plan only if Patient 1 noticed the change in payment amount and became

concerned about the theoretical possibility that DaVita would bill him or her for

the balance (even though DaVita had not done so for 20 months). The complaint

contains neither a straightforward allegation of causation nor any allegation

suggesting that the reduced payments caused Patient 1 to drop coverage.

      In sum, after Patient 1 dropped coverage under the Plan for a reason

unconnected to Defendants’ obligations under the MSP, Patient 1 ceased to be a

                                          37
beneficiary of the Plan, and the Plan had no obligation to pay—first, second, or at

all. We therefore affirm the district court’s dismissal with respect to the 10-month

period after Patient 1 dropped coverage under Virginia Mason’s Plan.

      AFFIRMED in part, VACATED in part, and REMANDED. The parties

shall bear their own costs on appeal.

                                         38