United States v. 2020-11-24 | 19-35692 | DAVITA INC. V. VIRGINIA MASON MEMORIAL | precedential | opinion |

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

DAVITA INC.,
Plaintiff-Appellant,

v.

VIRGINIA MASON MEMORIAL
HOSPITAL, FKA Yakima Valley
Memorial Hospital; Y
AKIMA
VALLEY MEMORIAL HOSPITAL
EMPLOYEE HEALTH CARE PLAN,
Defendants-Appellees.
No. 19-35692

D.C. No.
2:19-cv-00302-
BJR

OPINION

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

Filed November 24, 2020

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

Opinion by Judge Graber

*
The Honorable Leslie E. Kobayashi, United States District Judge
for the District of Hawaii, sitting by designation.

2 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

SUMMARY
**

Medicare
The panel affirmed in part and vacated in part the district
court’s dismissal of a dialysis treatment provider’s action
pursuant to the Medicare as Secondary Payer provisions of
the Social Security Act.
The defendant group health plan authorized payments to
providers of dialysis. Persons with end-stage renal disease
(“ESRD”) become eligible for Medicare after three months
of dialysis treatment. When, as here, both Medicare and
another insurer have independent obligations to pay for a
service such as dialysis, the Medicare as Secondary Payer
(“MSP”) provisions decree who pays first and who pays
second. The MSP also imposes substantive requirements on
group health plans, including forbidding plans from taking
into account an ESRD patient’s eligibility for Medicare
during the first thirty months of Medicare eligibility.
Plaintiff brought suit pursuant to the MSP’s private cause of
action, which authorizes suit when a plan fails to make a
statutorily compliant primary payment, alleging that
defendants reduced the payment amount for a patient’s
dialysis because of Medicare eligibility as soon as the patient
became eligible for Medicare, without waiting the
mandatory thirty months. The reduced rate remained greater
than the Medicare rate, and so Medicare never made any
secondary payments. The district court dismissed, holding

**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 3

that the MSP’s private cause of action is available only when
Medicare has made a payment.
Vacating in large part and remanding for further
proceedings, the panel held that the statutory text,
congressional purpose, and regulatory clues made clear that
Congress did not intend payment by Medicare to be a
prerequisite to bringing a private cause of action under the
MSP. Disagreeing with the Sixth Circuit, the panel held that
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.

COUNSEL

John Patrick Elwood (argued), Andrew T. Tutt, and Samuel
F. Callahan, Arnold & Porter Kaye Scholer LLP,
Washington, D.C., for Plaintiff-Appellant.

Kathleen Drummy (argued), Richard J. Birmingham, and
Christine Hawkins, Davis Wright Tremaine LLP, Seattle,
Washington, for Defendant-Appellees.

Deanna J. Reichel, Fish & Richardson P.C., Minneapolis,
Minnesota, for Amicus Curiae Dialysis Patient Citizens.

Mary L. Stoll, Stoll Law Group, PLLC, Seattle, Washington,
for Amici Curiae Self-Insurance Institute of America, Inc.
and Pacific Health Coalition.

4 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

OPINION
GRABER, Circuit Judge:
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 amount
remained greater than the Medicare rate, so Medicare never
made any secondary payments. The district court dismissed

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 5

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/hea
lth-information/health-statistics/kidney-disease. 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

6 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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-

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 7

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 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

8 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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.
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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 9

expanded considerably in the intervening decades. We
explore three aspects of the MSP’s evolution: (1) its
“secondary 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 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.

10 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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

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.

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.

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 11

payments by Medicare in 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 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

Id. § 1395y(b)(2)(A).

12 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 13

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).
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

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.

14 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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
(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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 15

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
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

16 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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,

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 17

subparagraph (1)(C) bars a group health 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 require the private insurer to be the primary payer.
Therefore, a payment in accordance with subparagraph

18 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

(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, 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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 19

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 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).

20 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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

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).

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 21

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
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–

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.oe
d.com/view/Entry/1170?redirectedFrom=accordance#eid (last visited
Nov. 13, 2020) (def. 2b (“in accordance with”)).

22 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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-of-action
provision also encompasses a tort-liability insurer’s failure

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 23

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 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

24 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 25

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 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 assertion
4

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

26 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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, 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

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).

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 27

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

28 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 29

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 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

Medicare, our interpretation protects Medicare’s funds better than
Defendants’ interpretation would, because Defendants’ narrow
interpretation permits suit only in cases of direct harm.

30 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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.
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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 31

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. 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.

32 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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

DAVITA V. VIRGINIA MASON MEMORIAL HOSP. 33

that portion of the district court’s judgment and 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 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.

34 DAVITA V. VIRGINIA MASON MEMORIAL HOSP.

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 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.