Report: Medicare Miscalculates Dialysis Drug Costs

Medicare should keep better track of the costs of dialysis-related drugs that it pays for when covering patients who receive dialysis. (Image: Mirer)

Medicare should keep better track of the costs of dialysis-related drugs that it pays for when covering patients who receive dialysis. (Image: Mirer)

Medicare is miscalculating the drug costs it pays to dialysis centers that treat patients with end-stage renal disease, making it difficult to determine whether the federal agency is making appropriate payments, concludes a report released today.

In 2012, the most recent year with complete data, about 370 000 patients receiving dialysis were being treated at about 5800 facilities. Since 2011, Medicare began paying these facilities a “bundled” payment for all services, including dialysis-related drugs, creating an incentive for physicians to be more judicious when prescribing medications. Previously, dialysis centers were paid separately for the medications, an unintended incentive to boost profits by overuse of the medications.

The bundled payments appear to have decreased use of the drugs: on a per treatment basis, the use of erythropoiesis-stimulating agents (ESAs) for treating anemia, as well as iron, vitamin D agents, and antibiotics decreased by 38% from 2007 to 2012.

However, the report by the US Department of Health and Human Services’ Office of Inspector General (OIG) found that the bundled payment does not reflect actual cost fluctuations of the individual drugs within the bundle. For example, the cost for the majority of drugs given to patients receiving dialysis has declined, whereas the costs of ESAs (which represent the majority of dialysis drug costs) have steadily increased.

“This means that although dialysis facilities are using ESAs to a lesser extent, any savings may potentially be offset by the drugs’ cost increase,” the report authors wrote. “However, without taking both the payment and utilization aspects into account, we are unable to estimate the extent to which this may be occurring.”

The report’s authors also recommended that Medicare stop using the federal Bureau of Labor Statistics’ Producer Price Index (PPI) for Prescription Drugs for the purpose of adjusting the price of the dialysis drug bundle because the PPI is a measure that reflects price changes associated with the average mix of all prescription drugs sold in pharmacies. The OIG report found that although acquisition costs for most dialysis drugs decreased in 2012, PPI estimated a 25% increase in drug costs.

The OIG report comes a day after the Medicare Payment Advisory Commission (MedPAC) issued its report to Congress with recommendations for a variety of Medicare issues. MedPAC recommended that Congress should not increase the outpatient dialysis payment rate for calendar year 2015. MedPAC also recommended that Congress should direct Medicare to develop a tool to assess poor outcomes related to anemia treatment for patients receiving dialysis for monitoring facilities that may underuse medications. The concern is that because medication payments related to dialysis treatment are now bundled, facilities may seek to boost profits by underusing the medications.

Categories: Dialysis, Health Policy, Renal Diseases