SCOTUS Weighs In on Paying for Dialysis

By Chuck Dinerstein, MD, MBA — Jun 29, 2022
As the Supreme Court’s decision on Roe v. Wade took all of the oxygen out of the media greenroom, another SCOTUS decision on our healthcare, in this case, over insurance costs, was pretty much overlooked. That’s too bad because, in 2019, it involved slightly more than 6% of that budget – for individuals with end-stage renal disease (ESRD).
Image by Steve Buissinne from Pixabay

Today, nearly 15% of the population has some degree of chronic kidney (renal) disease and 750,000 have end-stage renal disease (ESRD), with 70% requiring dialysis. Medicare provides health coverage to patients with ESRD irrespective of age. These Medicare payments were the first attempt at “Medicare for All,” which was signed into law by President Nixon one week before his re-election in 1972. For individuals not old enough to qualify for Medicare, there is a 30-month period during which they must use their funds or commercial (private) health insurance to cover the dialysis costs. The latest Supreme Court decision continues an ugly game played by private insurers and dialysis companies over how much is to be charged for that care. This is wrong in so many ways.


A few quick words about end-stage renal disease: just as it sounds, ESRD is the end of the line for your kidney function. Your choices are dialysis, transplantation, or death from the build-up of fluids and toxins. There are ethnic differences in the incidence of ESRD. According to the CDC, African Americans are four times more likely [WANT TO NOTE HIGH BP HERE?], Hispanics are 1.3 times as likely, and Native Americans are 1.2 times as likely to have renal insufficiency as White Americans.

A recent research letter in JAMA Internal Medicine provides some necessary financial context.

  • 80% of patients on dialysis have Medicare as their primary payer
  • While the number of patients with private insurance is small, their financial impact on these insurers is significant.
  • For all monthly services [1], a patient with ESRD costs “$14,399, 33 times the spending by enrollees without ESRD $435.”  
  • On average, dialysis care costs private insurers $10,149/month compared to an estimated payment for the same services by Medicare of $3,364 – three-fold less.

The difference in those payments has created diametrically opposed arbitrage [2] opportunities for the dialysis companies and the private insurers. Dialysis companies seek to enroll as many patients with private insurance as possible to increase their reimbursement while insurance companies try to off-load these patients onto Medicare as soon as possible to reduce their expenditures.

The SCOTUS opinion

The case, Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita Inc, was decided by a 7-2 vote, with Justice Kavanaugh writing the majority opinion.

Congress recognized the hazard of an insurance plan trying to off-load these expensive patients, required a 30-month waiting period, and prohibited discrimination against these patients, stating that a plan:

“may not differentiate in the benefits it provides between individuals having end-stage renal disease and other individuals covered by such plan.”

The Marietta plan lowered the cost of out-patient dialysis for all of their beneficiaries, not violating, in Justice Kavanaugh’s view, the literal letter of the law. As he wrote:

“the Plan does not ‘differentiate in the benefits it provides between individuals’ with and without end-stage renal disease.”

Of course, 99.5% of patients on dialysis have ESRD; very few other conditions require this type of service. [3] This was the argument put forward in the minority opinion authored by Justice Kagan, who felt the decision

“flies in the face of … common sense, … [o]utpatient dialysis is an almost perfect proxy for end-stage renal disease. … [It] should make no difference” if a proxy is only 99.5% (not 100%) accurate …. A tax on yarmulkes remains a tax on Jews, even if friends of other faiths might occasionally don one at a Bar Mitzvah."

The plaintiff, in this case, was DaVita, one of the two large dialysis businesses in the US. The decision to treat DaVita, and presumably Fresenius, the other large dialysis provider, as out-of-network providers resulted in the lowest payment possible to these companies. They contended that the limitation on benefits had a disparate impact. In this instance, Judge Kavanaugh, a literalist, focused instead on the fact that the plan did not provide a different benefit, treating “all individuals equally.” To my mind, and you can certainly disagree, this is a bit of sophistry, but “word-smithing” is a critical activity in the courts.

Critically, this incentivizes patients to leave this plan and get into either traditional Medicare or, since 2021, Medicare Advantage.

DaVita Is Not Blameless

DaVita and Fresenius are not blameless in this game. They have been instrumental in trying to steer patients towards higher reimbursing private insurers. I wrote about this back in 2016; here is an excerpt.

Founded in 1971, [the American Kidney Foundation] has attempted to help with the financial hardships of ESRD care. They created a program, Health Insurance Premium Program (HIPP) to provide insurance premium payments so that patients could afford care. The problem is that this AKF program is funded by the second player – the for-profit dialysis networks, and the money earmarked for the HIPP program. The funds donated by the dialysis companies return to them through Medicare, Medicaid, and private insurers who pay for treatments, creating a conflict of interest. To be fair, the AKF recognized a conflict and attempted to create a firewall of sorts. First, they got the approval of the Office of the Inspector General for Health and Human Services that such an arrangement was not a “kickback.” More importantly, patients are required to choose their insurance program; the AKF does not make the choice.

California introduced legislation to fight DaVita and Fresenius’s behavior. I wrote about this in 2018; the bill was passed in 2019 and stayed by the courts in 2020.

Bottom Line

There is an actual bottom line here because dialysis comes with co-payments tied to reimbursements. The “DaVita approach” is to shift their payments to the highest commercial insurance possible, providing financial assistance through AKF to cover co-payments, knowing that the reimbursement from the insurance company will significantly exceed their expenditure to “help out” patients. (I suppose if this is accounted for as a charitable contribution, it might also lessen DaVita’s tax burden). The Marietta approach says we pay the bare minimum, and the rest is the patient's responsibility, shifting their costs onto their beneficiaries.

Let’s again be very clear. We pick up the tab for healthcare, not the insurance companies or the self-insured plans like Marietta, or the government. The fight here is over whether the insurance or dialysis companies get to keep the spoils. There is something wrong here.


[1] This number includes other doctor visits, hospitalization, and other services, so the number may be an overestimate of the actual cost simply for care for ESRD alone.

[2] Arbitrage is the simultaneous purchase and sale of the same asset in different markets to profit from the asset's price differences. In this instance, the asset is the patient.

[3] Blood components can be sorted using a similar procedure called apheresis, which typically can be done in an outpatient setting using the same type of equipment


Sources: Justices validate denial of insurance coverage for outpatient dialysis Scotusblog

SCOTUS Sides with Group Health Plan in Dialysis Reimbursement Case Health Payer Intelligence

U.S. Supreme Court rules against DaVita over dialysis coverage Reuters

High Court Rules for Hospital Health Plan in Kidney Care Fight (1) Bloomberg Law


Chuck Dinerstein, MD, MBA

Director of Medicine

Dr. Charles Dinerstein, M.D., MBA, FACS is Director of Medicine at the American Council on Science and Health. He has over 25 years of experience as a vascular surgeon.

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