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The Political Process: In Need of Dialysis Detox

by Ashley Bender

Lobbying by corporate giants may have succeeded in swaying a powerful government agency from changing an outdated, expensive payment system that wastes taxpayer dollars on bloated corporate profits. And, while the industry did pay $8 million on its lobbying effort to prevent the changes, the annual future corporate return on the effort is projected to be as much as 100 times ($800 million) the lobbying cost.

The United States Government and Accountability Office found that Medicare overpaid dialysis treatment centers for services administered to seniors by between $650 and $800 million in 2011. Most of the overpayment went to two large corporations, DaVita HealthCare Partners Inc. and Fresenius Medical Care AG, which together control a majority of the dialysis center market.

To mitigate the gross overpayment to dialysis treatment centers, the Centers for Medicare and Medicaid Services (CMS) proposed to reduce future payment rates for expensive anemia drugs and other dialysis center services by a total of 9.4 percent for calendar year 2014. Reducing Medicare payments to dialysis centers Medicare would save an estimated $4.9 billion over the next ten years, according to the Congressional Budget Office. But the healthcare giants were able to convince more than 100 members of Congress to oppose the proposed CMS rule and suggest that the Obama administration either reverse the spending cuts or dramatically water down the spending cut proposal.

On Friday, November 22, CMS released a press statement acquiescing to the wishes and pressures of the health care corporate titans. In the end, CMS’ policies remain virtually unchanged. Rather than cutting reimbursement payments to dialysis centers by 9.4 percent, the payments will be kept essentially flat between the 2013 reimbursement rates and the 2104 reimbursement rates. Dialysis treatment centers will continue to be overpaid, and DaVita HealthCare Partners Inc. and Fresenius Medical Care AG will continue to reap hundreds of millions of excess taxpayer dollars.

CMS was mandated by the American Taxpayer Relief Act of 2012 to review Medicare payments to dialysis facilities in light of the centers’ utilization of certain drugs and biologics. Since the implementation of the Medicare Improvements for Patients and Providers Act of 2008, Medicare has paid dialysis facilities through a bundled payment system that includes a certain basket of dialysis-related services and items the facility provides each patient. However, the bundled payment rate that CMS paid to dialysis centers in 2011, 2012 and 2013 was based on the rate of utilization of end-stage renal disease (ESRD) medications by the dialysis centers in 2007. But the use of such drugs, such as three expensive anemia medications, Epogen, Procrit and Aranesp, has drastically decreased since 2007. For example, the use of these three common erythropoiesis stimulating agents (ESAs) decreased by about 23 percent due to new research by the FDA which demonstrated that potentially lethal side effects were overlooked during the drugs’ initial approval processes, and because Medicare researchers declared that there is no direct correlation between the drugs and quality of life improvement. However, even though the drugs’ use declined, they still account for approximately 73 percent of Medicare payments to dialysis centers. Medicare should have decreased the bundled payments to dialysis centers to save taxpayer money for other uses. Instead, Medicare is using taxpayer dollars to pay dialysis centers for drugs that are not actually being used.

In the end, after the dialysis industry had already dedicated $8 million to lobbying efforts, CMS decided against lowering reimbursement payments. Rather than take into account their own researchers’ findings regarding drug use, drug costs and necessary expenditures when reviewing dialysis center payment bundles, CMS took the side of a few powerful companies. CMS made a mistake when it did not make the 9.4 percent cut to reimbursements for dialysis center payments. The public, and the rest of Medicare’s valuable programs, could have saved hundreds of millions of dollars in reimbursement payments.

Ashley Bender is a Public Citizen health policy fellow.

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