End-Stage Renal Disease: Reduction in Drug Utilization Suggests Bundled Payment Is Too High

What GAO Found

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.