End-Stage Renal Disease:

Reduction in Drug Utilization Suggests Bundled Payment Is Too High

GAO-13-190R: Published: Dec 7, 2012. Publicly Released: Dec 10, 2012.

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What GAO Found

Utilization of ESRD drugs in 2011 was about 23 percent lower, on average, than it was in 2007, driven largely by a decline in the utilization of ESAs. As a result, Medicare may have paid more than necessary for dialysis care in 2011 because the bundled payment rate in that year was based on 2007 utilization levels. We estimated that Medicare expenditures on dialysis would have been about $650 million to $880 million lower in 2011 if the bundled payment rate were rebased to reflect the 2011 utilization level of ESRD drugs. Furthermore, this estimate of potential savings could be larger in future years if the level of ESRD drug utilization at the end of 2011 declines further, as preliminary data suggest. Rebasing the bundled payment rate to account for changes in ESRD drug utilization could help ensure that Medicare pays appropriately for dialysis services and also yield savings to Medicare. However, CMS officials indicated that they did not have immediate plans to rebase the rate and that the statute does not provide CMS with explicit authority to do so. Therefore, Congress should consider requiring the Secretary of HHS to rebase the ESRD bundled payment rate as soon as possible and on a periodic basis thereafter, using the most current available data.

Why GAO Did This Study

Most individuals with end-stage renal disease (ESRD)--a condition of permanent kidney failure--are eligible for Medicare regardless of their age. The most common treatment for individuals with ESRD is dialysis, which removes excess fluids and toxins from the bloodstream. In 2011, Medicare spent about $10.1 billion on dialysis care (including beneficiary cost sharing) for about 365,000 beneficiaries.

The Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services (HHS) that administers the Medicare program, recently changed the way Medicare pays for dialysis care, as required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Prior to 2011, Medicare paid dialysis facilities a single rate for providing a dialysis treatment and certain related items and services, which is a common form of Medicare payment known as bundling. Medicare paid separately for certain other dialysis-related items and services that were not covered under the bundled payment, such as injectable drugs used to treat complications associated with ESRD. Effective January 1, 2011, the bundled payment for dialysis care was expanded to include payment for items and services such as injectable ESRD drugs and their oral equivalents for which Medicare previously had paid separately.

Pursuant to MIPPA, CMS based the new bundled payment rate on the utilization of dialysis and related items and services, such as ESRD drugs, in 2007. Although MIPPA did not explicitly authorize CMS to further recalculate this rate--referred to as rebasing the payment rate--to account for changes over time in the utilization of dialysis and related items and services, such as ESRD drugs, beginning in 2012 CMS is required to annually increase the bundled payment amount to account for changes in the prices of bundled items and services and for changes in productivity. Accordingly, CMS increased the 2011 bundled rate by 2.1 percent for 2012 and has placed on its website a final rule providing for an increase in the 2012 rate by 2.3 percent for 2013.

MIPPA required us to report on, among other things, trends in the utilization of ESRD drugs. As discussed with the committees of jurisdiction, this report examines trends in the utilization of ESRD drugs from 2007 through 2011 and the implications of these trends for the accuracy of the bundled payment rate.

What GAO Recommends

Congress should consider requiring the Secretary of HHS to rebase the ESRD bundled payment rate as soon as possible and on a periodic basis thereafter, using the most current available data.

For more information, contact James Cosgrove at (202) 512-7114 or cosgrovej@gao.gov.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Medicare Part B covers dialysis for the treatment of end-stage renal disease (ESRD). The Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services (HHS) that administers the Medicare program, pays a bundled per treatment rate for dialysis and related services. In 2008, Congress expanded the bundle to include injectable drugs. The expansion was implemented in 2011, based on drug utilization in 2007. GAO showed that drug utilization in 2011 was about 23 percent lower than in 2007, suggesting that the 2011 rate was excessive. GAO asked Congress to consider rebasing the ESRD payment rate, using the most recent data. In the American Taxpayer Relief Act of 2012 (ATRA), Congress directed HHS to revise the ESRD bundled payment rate to reflect the findings in GAO's report. Pursuant to ATRA, CMS issued a final rule in 2013 that implemented a per treatment payment reduction of $29.93. CMS stated that reduction will be phased in over three to four years, starting in 2014. The 2014 per treatment payment reduction is $8.16. The net present value of the savings from fiscal years 2014 through 2018 is approximately $2.075 billion.

    Matter: Congress should consider requiring the Secretary of HHS to rebase the ESRD bundled payment rate as soon as possible and on a periodic basis thereafter, using the most current available data.

 

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