Looking at healthcare through the dialysis lens

Proponents of healthcare reform point to two buckets of money when discussing the potential savings that could be redirected to expanding access: insurance profits and provider profits. From the point of view of the US dialysis program I can't see how eliminating private payers and/or private providers saves money.

Dialysis is a useful lens to view the question of healthcare reform because it is free of some complicating issues, dialysis has fewer variables. The procedure is as close to a widget as the healthcare system gets making the business model of the dialysis unit fairly straightforward (at least as compared to a large city hospital or probably a busy medical practice or other specialty). And critically access to dialysis is nearly universal in the US (there are exceptions, varying with Medicaid rules i.e. undocumented dialyzors) giving it a status most people want for healthcare generally.

It could be that the US's thirty-five years of experience with its dialysis entitlement (formally known as Medicare's ESRD [End Stage Renal Disease] program) is not relevant but if I can adequately lay the situation bare I think it will be a productive tool with which to test a proposed fix treatment for a very sick system.

Kidney Care Partners use to have a History posted that included this account of the birth of the US dialysis entitlement:
On October 30, 1972 the national ESRD program--Public Law 92-601--was passed as an amendment to the Medicare Act after only 30 minutes of debate with only one dissenting vote. The senate followed with a 52-3 vote. Senator Vance Hartke (D-Ind.) summed up the rationale for the new law:
In what must be the most tragic irony of the 20th century, people are dying because they cannot get access to proper medical care. We have learned how to treat or to cure some of the diseases (that) have plagued mankind for centuries, yet those treatments are not available because of their cost. Mr. President, we can begin to get our priorities straight by undertaking a national effort to bring kidney disease treatment within the reach of all those in need.

The Bill, signed into law by President Nixon, gave all Americans the right to treatment for ESRD, regardless of age. ESRD was and remains the only medical condition given this status."

I've spoken to folks who were around when the US decided to cover ESRD through Medicare and the assumption was that this was just a first step that within months some kind of universal coverage, single payer system would pass the Congress. The Democrats controlled both houses and Nixon signaled that he would sign the legislation but it never happened because Ted Kennedy, of all people, killed it.

Senator Kennedy has said that his greatest public mistake was killing the legislation that would have launched a national healthcare scheme in 1972.  At the time he decided that the proposed legislation was not good enough and that they'd get something better in the next session after the 1972 elections.  Well healthcare never came to the top of the agenda again.  Among the many consequences was that the ESRD program became orphaned, a down payment never followed through.

Outside the US dialysis is available where you think it would be (and even a few places that might surprise you) the details of its provision highlight some interesting choices (another post). Of course there is variation across the US but in general the dialysis population's growth has slowed in recent years to 2-4%, however, looking ahead at the aging, illing population the expectation is for a doubling of the number of people with CKD5 (kidney disease requiring dialysis or transplantation) every 15 years. Today of course a giant industry has grown up to supply and provide dialysis and kidney transplantation to over 400,000 people in the United States with CKD5.

There are the manufacturers who make the equipment and supplies, there are the providers who provide dialysis and transplantation, and there are the drug makers because in addition to dialysis or transplant treatment of CKD5 requires various drug therapies. All of the manufacturers and drug makers are for profit companies and 80% of the dialysis providers are for profit (Table 2-C, Outpatient dialysis services [Chapter 2C, March 2007 report pdf link] from MedPAC). The 20% of dialysis providers that are non profit are clustered in pockets across the country.

In general dialysis units serve discreet areas with minimal overlap. Certificate of need laws in many states have limited excess capacity. Provider growth in recent years has been mainly through industry consolidation, there are now two large for profit dialysis providers, who between them provide over 70% of all US dialysis treatments (excluding the VA I believe).  Over 90% of all dialyzors (those who need dialysis) travel to a unit 3 times a week to complete a 3 to 8 hour treatment; the average treatment length is just under 4 hours.

The care experienced by an individual dialyzor is the same no matter what their payment method. Once you're in the door you get the same treatment varying only by Dr.'s order. The cost of a treatment can be tightly controlled and known going in but over time the costs are adjusted to be less than the average revenue per treatment. I think the idea that in this situation care would be based on the average revenue per procedure is not controversial. For profit or nonprofit all entities try to keep revenues ahead of expenses. So the level of care provided will be based on the anticipated average revenue.

In dialysis the revenue comes from Medicare, Medicaid and private insurance. Depending on your age, employment status and years with CKD5 your treatment will be reimbursed at a variety of rates (this is the standard breakdown drawn from the US Renal Data System pdf link national data, of course averages are made of extremes). 75% of dialyzors are Medicare primary meaning Medicare sets the reimbursement rate and provides 80% of that rate. Of the people on Medicare about 50% have the remaining 20% of the allowed rate picked up by Medicaid, the so called dual eligible's (in some state Medicaid will pay the 20%, in others no). 10% of the dialyzors are Medicaid primary. In this case the state may pay the Medicare rate at 80%, the Medicare rate at 100% or even some higher amount based on audited costs. And about 10% are covered through employer group health plans or other private insurance. These private payers are reportedly charged multiples (of 2 to 10) of the Medicare allowed rate.

What private payers are charged and what they pay is closely held by all; for profits and nonprofits all charge more than what Medicare allows and a variety of factors determine what they actually receive but clearly revenues are greater from those with private insurance. The remaining 5% is rounding error and about 2-3% without insurance. Those without insurance are mostly moment in time situations but there is a growing number of "never eligibles" particularly as Medicaid rules change regarding undocumented dialyzors.

Depending on the state and the particular unit, 100% of Medicare's allowed rate could be the lowest amount reimbursed or among the highest. In general states with generous Medicaid reimbursement rules or a solid group of dialyzors with private insurance will have a higher average reimbursement rate than states with dysfunctional dialysis Medicaid programs (FL, MS). I know that in WA 100% of the Medicare allowed rate is about the least a dialysis provider will receive. If 100% of the allowed Medicare rate is the worst reimbursement then the value of care (even for those who are Medicare primary) will be greater than 100% of the Medicare allowed rate.

Now to add in the question of profits and how they fit into this framework:
(Average reimbursement) - (required profit) = (level of care)
(level of care) - (required profit) > (Medicare composite rate)
then switching everyone to an expanded Medicare/all non-profit provider World would result in a decrease in care.

Looking at dialysis switching everyone to single payer does not generate savings and provides less treatment support in areas where currently there is good Medicaid support. The only regions to clearly benefit would be those with low Medicaid support. All of this of course puts aside the cost of actually nationalizing the provision of dialysis or whatever has to be done to switch 3,500 dialysis units over to nonprofit status. That would be a large expense.

As far as insurance industry profits there is a problem. Where those savings are greatest are also areas with higher average per procedure revenue, therefore one could say that capturing those savings would directly correlate to diminished care.

Saving money on drugs seems tricky. Medicare could directly negotiate for medication and then resell or give them to providers or directly to dialyzors. Bundling drugs into the per treatment composite rate takes away the incentive to profit from administering the medication put it still provides profit to manufacture and market the drug.

In dialysis how could you capture the profits of the companies involved without generally decreasing the level of care?

The only place I see real potential savings is through fewer hospitalizations - Medicare Part A savings by increasing Medicare Part B spending. I think dialysis is the way to save money. More dialysis, fewer/shorter hospital stays but there is little net savings - I'm saying move spending from Part A to Part B.  Beyond that the other savings available to the system, both financial and in human suffering, is in screening and education.

Identifying the 20 million Americans with kidney disease and slowing its progression would be a positive but there is a catch. Currently the vast majority of those people will die of other things before they need dialysis. So better care could mean more people on dialysis, which probably means it all leads back to learning good lifetime health habits of diet and exercise but in the mean time we can do better. I'm sure we can do better. I just don't think it will save money. I think it will cost money, net in the short/mid run.

Tags: Healthcare, kidney dialysis, Medicare, US ESRD program (all tags)


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