ESRD Proposal May Inadequately Reimburse Medicare Advantage Plans

February 06, 2020 - While payers and Medicare Advantage proponents applauded elements of the Medicare Advantage rule that CMS proposed yesterday which will increase plans’ revenues by nearly one percent, many expressed concerns about the proposed rule’s approach to chronic disease management costs for patients with end-stage renal disease (ESRD).

The proposed rule mainly focuses on prescription drug pricing, giving Part D plans the ability to negotiate pricing, promoting less expensive generic and biosimilar drugs through a new “preferred” specialty tier, and allowing patients to compare drug prices for the one that best fits their needs and wallet.

But apart from drug pricing, the proposed rule also addresses a population that until now has been largely excluded from Medicare Advantage coverage: patients with the severe stage of chronic kidney disease called end-stage renal disease.

End-stage renal disease is a serious condition that requires invasive and urgent chronic disease management. At this stage of kidney failure, the organs have completely shut down, the American Kidney Fund (AKF) website explains.

“If you have kidney failure (end-stage renal disease or ESRD), you will need dialysis or a kidney transplant to live,” AKF states. “There is no cure for ESRD, but many people live long lives while on dialysis or after having a kidney transplant.”

READ MORE: Proposed Medicare Advantage Changes Address Drug Pricing, ESRD

Costs of chronic disease management for at this stage are high. According to MEDPAC, the average cost to cover Medicare beneficiaries with ESRD in 2016 was over $67,000.

Currently, patients with ESRD have only been eligible to enroll in Medicare Advantage plans under certain exemptions and if they develop ESRD while on a Medicare Advantage plan they can keep their Medicare Advantage plan. According to AARP, over ninety-percent of patients with kidney failure are on Medicare.

However, the proposed rule seeks to increase patients’ options for chronic disease management and implements certain payment changes for Medicare Advantage plans with regard to ESRD.

“Effective January 1, 2021, Medicare Advantage organizations will no longer be responsible for organ acquisition costs for kidney transplants for Medicare Advantage beneficiaries, and such costs will be excluded from Medicare Advantage benchmarks and covered under the fee-for-service program instead,” CMS states in its 2021 Medicare Advantage and Part D Advance Notice Part II Fact Sheet.

However, some payers and Medicare Advantage proponents have expressed concerns that the payment to Medicare Advantage plans will not effectively cover the costs of treatment.

READ MORE: Medicare Advantage Costs 40% Less than Fee-For-Service Medicare

Matt Eyles, president and chief executive officer of America’s Health Insurance Plans (AHIP), issued a reserved statement on the matter.

“We are concerned that some proposals could undermine the critical funding that protects millions of Americans’ access to the benefits and care they need, including individuals with kidney disease who are newly eligible to enroll in Medicare Advantage,” Eyles explained. “We will continue to review the advance rate notice and the proposed rule, and we look forward to sharing important feedback with CMS during the comment period.”

Though it celebrated the proposal’s advancements on telehealth coverage, the Better Medicare Alliance (BMA) likewise was hesitant to comment on the ESRD portion of the rule.

“It is unclear whether the proposed regulation offers the changes needed to address issues previously identified by BMA in the treatment of MA coverage for End-Stage Renal Disease (ESRD) patients who are eligible for enrollment beginning in 2021,” Allyson Y. Schwartz, president and chief executive officer of BMA, said in a press release.

She referred to a study conducted by Avalere on behalf of BMA in December 2019.

READ MORE: CMS Proposes Alternative Payment Models for Chronic Kidney Disease

The study looked at the current Medicare Advantage reimbursement rate for the small population of Medicare Advantage beneficiaries with ESRD.

The researchers found that payments to Medicare Advantage plans for ESRD were based on a methodology that is distinct from the reimbursement model for the rest of the plans’ enrollees. The model draws on state-level data, as opposed to county-level data.

As a result, the current ESRD payment model fails to account for state-wide treatment cost variations with serious implications for this particular disease. Because of this model, Medicare Advantage plans experience significant ESRD reimbursement rate fluctuations year over year.

The study used 2018 fee-for-service claims data on Medicare beneficiaries with ESRD by metropolitan statistical area and set the data against 2018 state-level ESRD Medicare Advantage benchmarks.

Medicare spending on beneficiaries with ESRD proved higher than the Medicare Advantage benchmarks such that, particularly in urban regions with high Medicare Advantage penetration, Medicare Advantage plans were underpaid.

Ten of the top fifteen metropolitan statistical areas had Medicare Advantage plans that would have been underpaid by anywhere from two to twelve percent.

Over 45 percent of the beneficiaries living in metropolitan statistical areas covered in this study were in a region where the Medicare costs for ESRD were higher than what Medicare Advantage plans would have been reimbursed.

Neither BMA nor AHIP executives expressed confidence that the new proposal will resolve these payment model flaws, but both organizations are reviewing the rule to provide feedback.

Across the industry, there has been a major push to provide more options for patients with chronic kidney disease. There is even pressure coming from outside of the industry, with an executive order related to the issue in July 2019.

The condition has stirred up legal strife within the healthcare industry as some claim that certain organizations take advantage of patients’ reliance on dialysis.

BMA and AHIP have advocated for the role that Medicare Advantage can play in resolving some of the tensions for patients.

“ESRD patients have complex and costly needs and Medicare Advantage is well-suited to provide high-value care to this population, because of the coverage and care it offers to chronically ill beneficiaries,” the BMA brief explained. 

“However, as these findings suggest, Medicare Advantage plans in areas with the most ESRD patients would likely be underpaid in the current payment system. Without adequate payment, Medicare Advantage plans may be forced to raise consumer costs, reduce supplemental benefits, or limit service areas—not just for ESRD patients, but for all enrollees.”