The American Kidney Fund believes that the Medicare End Stage Renal Disease (ESRD) program should be treated similarly to other Medicare prospective payment systems in having a mechanism for an annual update to the dialysis reimbursement rate. Over 300,000 Americans with end stage renal disease rely on dialysis to keep them alive. Seventy-five percent of these patients depend on Medicare to cover their dialysis treatment. (Source: Abt Associates, “Updating the 2002 Composite Rate for Dialysis Treatments,” August 1, 2001)

In 1972, Congress committed to provide ESRD patients with coverage for this lifesaving therapy through the Medicare program. In 1983, Congress implemented the first Medicare Prospective Payment System, known as the “composite rate.” However, Congress did not include an annual update mechanism for this per-treatment dialysis payment. ESRD is one of only a few Medicare Prospective Payment systems without an annual update formula.

Without an annual update framework, the renal community must appeal to Congress every year, instead of relying on the Department of Health and Human Services to make a routine, data-driven decision on payment adequacy. In the last 12 years, there have been only two increases in the ESRD composite rate, totaling 3.6%, to cover inflation, new technologies and increased salaries. The Medicare Modernization Act mandates another 1.6% increase in the composite rate in January 2005. However, the total of these increments is far below the increase in costs of medical care over the same time period, while treatment of ESRD patients has become more complex due to an older and sicker population.

Current payments from Medicare make it difficult for dialysis facilities to cover inflation and labor costs or compete with other health care providers for scarce nursing and other health care professionals. Dialysis providers have relied upon enhanced efficiency to expand access to care and improve treatment outcomes. The industry maintains that further progress is no longer possible under the current reimbursement structure.

The Medicare Payment Advisory Commission (MedPAC) has consistently acknowledged the need for an increase in the composite rate and, in its 2000 report, recommended that Congress enact an annual update mechanism. The Amercian Kidney Fund urges Congress to maintain its commitment to ESRD patients by establishing an annual update formula for dialysis providers to be developed by the Department of Health and Human Services with guidance from stakeholders in the renal community.