PROTECT THE MEDICARE DIALYSIS BENEFIT

HOW MEDICARE PAYS FOR DIALYSIS SERVICES

Typically, patients receive dialysis treatments three to four times a week. Medicare pays for this benefit using a bifurcated system which includes: (1) the composite rate, and (2) separately billed items and services. Established in the mid-1980s, the composite rate covers “all necessary services” required for each dialysis treatment. The dialysis composite rate is the only Medicare rate that does not have an annual update mechanism to adjust for inflation. The lack of an update mechanism, which is incorporated into all other Medicare prospective payment systems, means that Congress must enact legislation and the President must sign it into law before dialysis facilities can receive an update.

CURRENT RATES DO NOT COVER THE COST OF PROVIDING PATIENT CARE

The cost of treating patients with kidney failure, also known as End Stage Renal Disease (ESRD), has been rising at a faster rate than the Medicare reimbursement for dialysis services. According to analysis performed by The Moran Company, the Medicare margins for dialysis providers were 0% in 2006; they are projected to be -3% in 2007 and -6% in 2008. These margins differ slightly from analysis by the Medicare Payment Advisory Commission (MedPAC) because The Moran Company includes non-reimbursed bad debt and medical director fees, which represent critical short-falls that MedPAC currently does not recognize.

The fastest growing cost is the labor component, which makes up about 40 percent of the cost of providing patient services. Dialysis facilities must compete for the same nurses and other health care professionals who work in hospitals and other settings that automatically receive an update. Without an update, it is difficult to hire and retain these professionals who provide patient care.

In contrast to the dialysis community, other Medicare providers have received inflationary updates over the years. As illustrated in the chart below, hospital market basket updates have seen regular increases, while dialysis payment increases lag far behind. The Consumer Price Index (CPI) and Medical CPI comparison also demonstrates how far dialysis facilities are falling behind because of inflation.

MEDPAC CONSISTENTLY SUPPORTS A COMPOSITE RATE UPDATE

Year after year, MedPAC has consistently recognized the need for, and voted to recommend, a payment update to the composite rate. Based on its review of payment adequacy and expected cost changes, MedPAC has recommended updates since 2003.

CONGRESS RECOGNIZES THE NEED FOR A DIALYSIS UPDATE

Congress has consistently, and in a bipartisan, bicameral manner, recognized that dialysis facilities deserve an update. However, in order to provide it, Congress has had to pass major health care legislation.

CONGRESS MUST PASS A COMPOSITE RATE UPDATE THIS YEAR

While Congress, the Department of Health and Human Services, and dialysis facilities work on broader dialysis payment reform, a goal the KCC strongly supports, Congress must act now to provide facilities with an update as recommended by MedPAC. Without an update, facilities will fall further behind other providers and have more difficulty hiring appropriate health care professionals.