By Bill Peckham
Last week Renal Business Today linked uncritically to Dr. Richard Amerling's Medicare Rationing Begins in January, 2011, an article that manages to shoehorn in a greatest hits of healthcare political bogeymen while presenting the provision of dialysis as an early example of the heathcare dystopia that is just around the corner. It's all here: private insurance disappearing, death panels, arbitrary reimbursement cuts, rationing, federal micromanagement, congressional mismanagement, and nationalization of healthcare! Oh my.
Let's go through doctor Amerling's article from its start to its penultimate paragraph of doom. He begins:
House and Senate Democrat leaders, and President Obama, argue that they can "pay for" health insurance "reform" by cutting $500 billion from Medicare spending over the next decade—largely through arbitrary reimbursement cuts,— without reducing the quality of care delivered to beneficiaries.
Actually it is the Congressional Budget Office that scored the Senate's healthcare legislation as saving billions of dollars over 10 years (and even more in the 10 years after that). The cuts have a name, Medicare Advantage, but since talking about Medicare Part C causes people's eyes to glaze over why not call them arbitrary reimbursement cuts? That aside Amerling's question is: Can Medicare be cut while maintaining or improving clinical outcomes? Amerling doubts it is possible. He continues:
Yet, in January, 2011, Medicare will implement a new payment system for patients receiving dialysis for end stage kidney disease that will severely ration care to this vulnerable (and largely minority) population based on equally arbitrary payment reductions. These patients will be the unfortunate canary in the Medicare coal mine: "reform" legislation will expose millions of Medicare patients to rationing and reduced quality of care.
Armerling is saying that the expanded payment bundle, the PPS required under MIPPA, will arbitrarily cut reimbursement and ration care to people who need dialysis, and this change in how dialysis is reimbursed is a model that will be applied to the detriment of other parts of Medicare, leaving bad quality and rationing in its wake.
Politically this bogeyman has never made sense, Medicare is a Made Man in the federal budget - it wont get hurt. Amerling then goes into a weird history of dialysis reimbursement:
In 1972, Congress passed legislation creating an entitlement to Medicare for patients diagnosed with end stage renal disease. The bill allocated about $140 per treatment (or $1820 per month) per patient. This facility fee was large enough to incentivize the creation of dialysis centers, the expansion of dialysis treatment to all patients, and an end to what were very real "death panels." The ESRD program became a model for what good government could accomplish. There was broad consensus that payment for this catastrophic illness was a legitimate federal function and use of taxpayer funds. Unfortunately, Congress neglected to index the payment for inflation, leading the constant-dollar value to dwindle to around $14 per treatment. Dialysis units were able to survive, and even prosper, by aggressive cost-cutting (substituting technicians for nurses), consolidation into ever-larger chains, boosting efficiency (sometimes by cutting treatment times with a negative impact on outcomes), and by generating revenue from sales of drugs used during dialysis.
The panels that selected people for dialysis were choosing who would live not who would die but beyond that the numbers are a mess (for an authoritative review of early dialysis payments policies and amounts see this 2000 paper by Eggar (PDF link)).
The history ignores that for comparative purposes, the dialysis payment rate was set in 1983 at $127, which you can discount into today's dollars but what is really curious is that when describing how units managed to survive under stagnant payments Amerling leaves out the most important piece - accepting Medicare gives providers license to vastly inflate prices charged private insurers. This dialysis provider feast period known as MSP is the main net income engine for the industry. How could private payers be missing from this history? In the next paragraph Amerling identifies injectable drug margins as "the major source of profit for dialysis units". That's not true, commercial payers are the major source of profit for dialysis units.
The next two paragraphs are taken up with a discussion of EPO's separate payment history and how studies published in the last two years caused Congress to act in 2003 to bundle EPO. The key point Amerling makes about EPO is that:
the payment model that had evolved led to incentives to prescribe that were potentially hazardous, and needed reform.
It is nice to see someone from the Manhattan Institute for Policy Research acknowledge fee for service medicine results in overuse without clinical benefit but remember Amerling's premise is that the Obama administration's promise that Medciare spending can be cut while improving outcomes is false. This statement says the Obama administration is right.
The current payment model causes units to overuse EPO. Which is a financial problem but even more importantly is a cause for clinical concern. Therefor if you change the incentives to motivate doctors to use the right amount of EPO you could spend less and get better care. Now there is a lot to be said about how the details of the PPS came out and whether it would be truly budget neutral but there was a comment period, CMS could listen and improve the bill, so Amerling's next five paragraphs are premature. They require the PPS to go into effect unchanged.
If that were to happen it would not be as good a payment system as Medicare could devise. I spent 4,000 words saying what I thought could be improved and I have bet knowledgeable renal insiders that the final rule will not include oral drugs - but the insiders think oral drugs are going to be in, so I maybe I'm wrong. However, Amerling's analysis is off no matter the shape of the PPS in the final rule. In evaluating the value of the proposed bundle Amerling compares the $235 UMKECC came up with against the $198 base rate CMS used in the PPS. That's apples and oranges.
There is no doubt the PPS payment rate is confusing but Tracey Mayne did an impressive job breaking it down for Nephrology News & Issues:
The predicted 2011 mean bundled payment was $261.58. This number was
then reduced 21.73% to adjust for "anticipated positive effects" of the
impact of the case mix adjusters, or ways in which the new payment
system might pay more than the current system. It was then reduced by
1% as a cost offset to pay for anticipated outlier payments, and by
another 2% to meet the congressional requirement for a 2% reduction in
ESRD spend in 2011, to equal $198.64.
The base rate before case mix, the number comparable to UMKECC's $235, is $261.58 less $13 (the 1%, 2%, 2%) or $248 compared to UMKECC's $235. But wait, don't forget the $14 for oral meds that CMS included in the payment. UMKECC didn't imagine Part D meds in the bundle so they are not reflected in the $235. Take away the $14 and you have $234 vs $235. Given rounding the CMS's PPS payment rate is what UMKECC suggested.
In the second to last paragraph Amerling warns that:
Even the large dialysis chains will struggle to remain
afloat. Their situation will worsen dramatically if private insurance
(which covers dialysis at rates well above Medicare) disappears as a
result of the added costs and regulatory burdens imposed on them by
ObamaCare. In effect, this legislation sets the stage for an eventual
nationalization of the dialysis industry.
Where to begin?
The article is full of dissonance but to suggest the large providers are at risk in all this is not credible. A lot depends on what the PPS looks like in the final rule but since the payment is based on historic overuse of EPO there should be some room for all units to improve outcomes and cut costs by using less of the expensive drug. The large dialysis organizations have shown they want nothing more then to expand, they want more of the healthcare pie not less.
But finally, here there is mention of private insurers. Until now you would not know they had a role in financing dialysis. Amerling's apparently believes that covering people who are uninsured will decrease provider profits - this doesn't make sense. Looking at insurance industry equity prices in response to the Senate bill suggests that insurers are set to benefit under Obamacare. Far from disappearing to produce Hollywood blockbusters the insurance industry looks to be entering a growth phase. Amerling imagines all this somehow culminating in nationalization of the dialysis industry.
Really? Nationalization. In other words Medicare would own the dialysis units, pay the staff, buy the equipment. Amerling is imagining that somehow the federal government will be the only entity willing to provide dialysis after insurers and dialysis providers leave their industries to do other things. That's farcical but today some people consider this sort of hackery thoughtful commentary.
There is an interesting free market take on the provision of dialysis but Amerling actually dismisses it early in his piece by writing that "there was broad consensus that payment for this catastrophic illness was a legitimate federal function and use of taxpayer funds." At least there we agree.
All that travel only happened after all the paperwork was faxed to a unit. I took my first trip within four months of starting dialysis; there was no internet back in 1990. Cheryl made it happen no matter the languages and besides all the languages involved, there is also the fact that each unit has their own particular way of setting up the visit all their hoops.
I wish everyone dialyzed at the Northwest Kidney Centers but I know that isn't possible. Instead, I'll wish all dialysis providers followed the Northwest Kidney Centers model of promoting the optimal health, quality of life and independence of people with kidney disease. They do this through patient care, education, research ... and Cheryl.