Medicare Advantage insurers to be tested by flood of patients with permanent kidney failure

A corner of the health insurance industry that has enjoyed years of rapid growth and lucrative returns will soon face a challenge that threatens to upend that success.

Medicare Advantage insurers are gearing up to receive a potential flood of new members with permanent kidney failure, or end-stage renal disease, who will be able to enroll in the private alternative to traditional Medicare for the first time in 2021. Tens of thousands of these very sick, costly patients are expected to take advantage of the option.

While many Advantage insurers currently cover a few hundred end-stage renal disease, or ESRD, patients who developed the condition while already enrolled, the prospect of adding hundreds or thousands more to their rosters will put care and cost-management skills to the test.

Insurers who successfully manage the patients, who are in the final stage of chronic kidney disease, could do well financially; others could be squeezed and forced to hike premiums or cut benefits. “Health plans are going to have to change operationally in many ways,” said Jane Scott, a senior clinical consultant at Gorman Health Group, which advises Advantage plans.

New York-based insurer Emblem Health is preparing for new kidney disease members by striking up value-based care arrangements to drive better health outcomes. Michigan-based Priority Health is training its care managers to be able to better serve patients with ESRD. Humana is expanding its ability to facilitate dialysis at home instead of in a clinic, and for more than a year, CVS Health has been working on a clinical trial for a home hemodialysis device.

All insurers and dialysis providers are calling for higher payment rates from the federal government, but their pleas have so far landed on deaf ears.

“If you are a smaller health plan, a regional plan with less than 50,000 members, if you get more than your fair share (of ESRD patients), I think it would be very hard financially for these health plans to survive,” said Jill Selby, a corporate vice president at California-based SCAN Health Plan, which has offered a Medicare Advantage special needs plan for ESRD patients since 2006.

People with permanent kidney failure, including those under age 65, have long been eligible to enroll in the traditional Medicare program, which covers dialysis treatments, kidney transplants and other services. Dialysis removes waste and fluid from the blood when the kidneys are no longer working.

ESRD patients are the only patient group barred from enrolling in Medicare Advantage, except in limited circumstances. The 21st Century Cures Act signed into law by former President Barack Obama in 2016 lifted that restriction beginning next year, and patient advocates and dialysis providers cheered the change for allowing ESRD patients more choice in where they access coverage.

The change comes amid a broader push by the Trump administration to improve care and reduce costs for patients with kidney disease, which affects 37 million people. It aims to reduce the number of Americans who develop ESRD, promote dialysis at home and expand access to kidney transplants. About 750,000 Americans have ESRD, and 530,000 have Medicare benefits. It’s unclear if COVID-19 infections will increase the number of kidney failure patients, because kidney damage has been reported as a consequence of the coronavirus.

The CMS said it expects 83,000 ESRD patients to switch to Medicare Advantage due to the Cures Act provision, with half of those enrolling in 2021 alone. Advantage plans have more limited networks than traditional Medicare, but they also limit how much members must pay out of pocket. Traditional Medicare, which requires ESRD patients to shoulder 20% of the cost of dialysis services, has no such limit, and some states make it difficult for people younger than 65 to purchase a supplemental policy that would pick up out-of-pocket costs.

“For people with ESRD, this could really financially help many of them, simply because Advantage plans have an out-of-pocket limit,” said Gretchen Jacobson, vice president of the Medicare program at the Commonwealth Fund.

Some patients may be better off with traditional Medicare and supplemental insurance, however.

Richard Knight, president of the American Association of Kidney Patients and a former hemodialysis patient, said his organization has been helping several health insurers conduct focus groups to get a sense of the benefits and coverage that kidney disease patients need and want. Those could include benefits like transportation, home-delivered meals, home dialysis and a good pharmacy plan, because kidney patient drugs are expensive, he explained.

Knight said the jury’s still out on whether Medicare Advantage will be the best option for patients. That will depend on the benefits that plans ultimately offer, the premiums and the restrictions on which doctors patients can visit.

“We are staunch defenders of patient choice and being able to choose the option that’s going to make the most sense for the patient,” he said. “The question we have is will they design plans that complement the president’s executive order?”

Health insurers are worried they won’t be paid enough by the federal government to cover the cost of the expensive services and care management that ESRD patients require. Beyond kidney failure, patients often have multiple other chronic conditions, such as diabetes, heart disease or lung disease. Many are older, frail and face socioeconomic barriers to medical care.

While ESRD patients made up just 1% of Medicare enrollment, they accounted for 7%, or $35 billion, of the program’s costs in 2016, according to the U.S. Renal Data System. Together, Medicare spending on chronic kidney disease and ESRD totaled more than $114 billion, or about 23% of fee-for-service spending.

Advantage plans, which cover a total of 24.7 million people, are familiar with ESRD patients—131,000 were covered by the plans for various reasons in 2019, according to the CMS. The question is whether insurers have scaled the programs they need to care for them, said Sean Creighton, a managing director at consultancy Avalere Health and former CMS official.

“This is about more than payment,” Creighton said. Insurers “have to look at building networks of nephrologists; they have to look at contracting with dialysis centers; and putting in place care management for ESRD patients.”

Dr. James Forshee, chief medical officer at Michigan-based Priority Health, said the insurer has been actively planning for an influx of new ESRD patients. In addition to investing in training for care managers, Forshee said the insurer will ramp up its use of artificial intelligence and advanced analytics to pinpoint opportunities for better care. Care managers will assess patients in their homes to address any barriers, such as a lack of transportation to the dialysis clinic.

“We’ve spent a significant amount of time understanding what interventions we can help with, what social determinants we can help with, and we’ll do more of that with this new population,” he said.

Humana Chief Financial Officer Brian Kane told industry analysts in February that the insurer is modeling how many new members with end-stage kidney disease it might enroll next year, standing up clinical teams to manage them, and working with dialysis providers “to come up with creative risk-sharing mechanisms to help drive outcomes.”

Kane said Humana is also considering bringing additional capabilities to the dialysis marketplace to boost competition through home dialysis, “micro-clinics” or other alternative care sites. “We understand why it makes sense to bring ESRD into this population,” Kane said. “We just need to manage the short-term transition.”

Some insurers have turned their focus to identifying kidney disease early and preventing it from progressing to permanent kidney failure. CVS Health last year began rolling out its new chronic kidney-care management program to Aetna members and pharmacy benefit manager clients, CVS CEO Larry Merlo said at the J.P. Morgan Healthcare Conference in January.

CVS and Aetna are combing data to pinpoint patients at risk for chronic kidney disease to then prevent or slow the onset of the disease and the need for dialysis. Meanwhile, CVS’ home hemodialysis device, now in clinical trials, could be in the market by the second half of 2021, Merlo said.

Likewise, not-for-profit insurer EmblemHealth said it tries to catch kidney disease early and design clinical interventions to improve outcomes and quality of life while reducing costs. Members with Stage 4 or Stage 5 kidney disease are assigned a renal nurse to provide one-on-one support and care management, said Dr. Richard Dal Col, chief medical officer. The insurer is also expanding its strategy to implement value-based arrangements with clinicians to support chronic kidney disease patients.

While Dal Col said he is confident in EmblemHealth’s care-management skills, he—like most insurance executives—is concerned about receiving adequate reimbursement from the CMS. Insurers have commissioned reports from actuarial and consulting firms to show why they think ESRD payment rates fall short and will cause them to raise premiums or cut benefits for all Advantage members.

“Our internal analysis has found that the cost to manage the ESRD population is notably greater than the CMS revenue we receive,” Kaiser Permanente officials wrote in a March comment to the agency.

Insurers have also argued that they can’t negotiate high enough reimbursement rates for dialysis because just two companies dominate that market. Those companies—DaVita Kidney Care and Fresenius Medical Care—both support the change allowing kidney failure patients to enroll in Medicare Advantage. They typically can command higher payments from Advantage plans than fee-for-service Medicare.

“We actually see this change as an opportunity to further expand and demonstrate the effectiveness of our coordinated-care models, which ultimately reduce overall spending and improve outcomes,” said David Pollack, president of the integrated-care group at Fresenius.

Medicare Advantage plans are paid differently for ESRD patients than they are for other members. Plans receive risk-adjusted benchmark payments for ESRD patients that are calculated by the CMS at the state level using data from the traditional Medicare program.

One reason these payments are inadequate, according to an insurer-commissioned report by actuarial firm Wakely, is because traditional Medicare does not impose a maximum out-of-pocket limit on members and Medicare Advantage does. The current rates paid to Advantage plans don’t account for that difference.

Wakely’s report, which was sponsored by Humana, concluded that at current payment rates, if all ESRD patients enrolled in Medicare Advantage, plan profits would decrease by almost 2%. Plans would have to increase monthly premiums by $16 across all Advantage members and pare back benefits to maintain profit levels.

Another report, by Avalere, concluded that ESRD payments to Medicare Advantage plans fell below costs in 10 of 15 metropolitan areas with the most ESRD patients enrolled in traditional Medicare. Payments to Advantage plans were higher than fee-for-service costs in the other five, however. One issue, according to Avalere, is that payment rates are set at the state level instead of county level, so they don’t consider cost variation within a state. The report was commissioned by the Better Medicare Alliance, a group that advocates for Medicare Advantage.

CMS did not change the way it pays Advantage plans for ESRD patients when it published its final rate notice in early April, though it acknowledged the complaints and said it would continue analyzing the issue. Tim Courtney, a Wakely actuary and author of the firm’s report on ESRD, said the agency may not have the authority to change the payment calculation.

The agency did, however, seek to mitigate ESRD costs by allowing insurers to shift more costs to patients. It increased the maximum out-of-pocket level by 13% to $7,550 for all Advantage members and increased the total beneficiary cost threshold by $3, which allows plans to put slightly more out-of-pocket cost burden on members, Courtney said.

The CMS has also proposed loosening Advantage insurers’ network adequacy requirements related to dialysis. And it said the agency would continue to shoulder the costs for organ acquisitions for kidney transplants instead of having Medicare Advantage plans do so.

But organ acquisition is not where the costs are, said SCAN’s Selby. “The true expense is in the dialysis, and that’s continuing until they get the transplant,” she said. “But the transplant and professional fees and all the things that go into making sure a transplant isn’t rejected is also a huge expense.”

In the end, a lot will be determined by the number of ESRD patients who switch to Medicare Advantage.

“You could do extremely well financially with ESRD patients, but it’s kind of one of those unknowns,” said Jeff Fox, president of Gorman Health Group. “If you have a couple today it’s easy to manage; if you have a couple hundred, how easy is it going to be to manage?”