What the GAO Found
The GAO report 11-365, issued in March 2011, concluded that “CMS should assess adequacy of payment when certain oral drugs are included and ensure availability of quality monitoring data.” Given the ongoing implementation of the ESRD Quality Incentive Program (QIP) and the experience garnered with respect to the financial impact of the bundled payment, it is worthwhile to retrospectively consider the GAO’s concerns as stated with respect to the future of dialysis payment.
Per the GAO, the three key reasons for including oral-only ESRD drugs in the bundled payment for dialysis care are:
- To promote more efficient dialysis care, by allowing ESRD facilities to gain financially by reducing costs.
- To promote clinically appropriate care by removing financial incentives to use certain drugs over others.
- To improve access to oral-only drugs for certain beneficiaries, such as those who lack separate prescription drug coverage.
Part D Payments vs. Oral–Only Drugs
The GAO noted that CMS officials held that they were limited by the Medicare Improvement and Patients and Providers Act of 2008 (MIPPA), to using only data on payments for oral-only drugs under Medicare Part D.
Per the GAO, the Kidney Care Council took issue with the CMS assertion, noting that the actual cost of furnishing Part D drugs would be $45 per treatment, as opposed to the CMS estimate of $14 per treatment. The GAO concluded that Part D data “may understate the costs that dialysis organizations would incur to provide these drugs, in part, because Medicare currently pays for these drugs primarily for those beneficiaries with Part D coverage.”
Per the GAO, using solely Part D data to set the payment rate was less than ideal because, during the base period, not all ESRD beneficiaries had Part D Coverage. In fact, “Approximately 17 percent of all Medicare beneficiaries on dialysis did not have any prescription drug coverage in 2007. However, when oral-only ESRD drugs are included in the bundled payment, all beneficiaries on dialysis will be eligible for coverage for these drugs under Medicare Part B, and will not be subject to the Medicare Part D coverage gap,” which existed when a patient’s total annual spending on all prescription drugs fell between $2,840 and $6,448 in 2007.
The Medicare Part D coverage gap does not exist in the Medicare Part B reimbursement protocol under which the ESRD bundle is paid. The use of a Part D protocol which includes a coverage gap as a basis for setting payment for a Part B payment system that does not include a coverage gap, gave rise to a substantial concerns regarding underpayment.
Per the GAO “Part D data for 2007 through 2009 accounted for only about two-thirds of beneficiaries on dialysis. In 2007, for example, Part D payments for oral-only ESRD drugs for beneficiaries on dialysis with Part D coverage totaled about $445 million; however, this amount did not include payments for oral-only ESRD drugs for the approximately one-third of beneficiaries on dialysis who lacked Part D coverage.”
In 2011 the GAO concluded “Because it is unclear whether or to what extent beneficiaries with and without Part D coverage are comparable in their utilization of oral-only ESRD drugs, using Part D data to account for beneficiaries without Part D coverage presents challenges.”