In the debate about “Medicare for all,” what is known about the consequences – intended and unintended – of instituting publicly funded health care? For approximately 750,000 Americans currently with advanced kidney failure, Medicare funding has been in place for nearly fifty years. In 1972 – seven years after passage of the original legislation – Congress voted to amend Medicare, entitling all US citizens, regardless of age, to undergo dialysis treatment or kidney transplantation, financed by the federal government. Understanding how this unique Medicare entitlement for kidney failure works – and doesn’t work – can enlighten policy-makers and the public on the broader implications of publicly funded health care.
The health care and political landscape of the 1972 amendment was vastly different from today’s hyper-polarized environment. Maintenance hemodialysis, a life-saving treatment for chronic kidney failure, had been introduced in the 1960s, once technology made it possible to connect a patient’s bloodstream repetitively to a blood-cleansing artificial kidney machine. For a few hours, three times weekly, patients with “end stage renal failure” could undergo treatments, which removed waste products and excess fluid. The treatment was expensive, however, and not covered by most insurance policies. The few able to avail themselves of limited resources were often selected by “god squads,” teams of physicians and lay people who determined the patient’s rehabilitation potential and other criteria to determine medical “suitability.” Despite the absence of comprehensive clinical trials, a committee of distinguished physicians, scientists, and policy makers recommended public funding for kidney failure treatment. Persuaded largely by the realization that only the absence of adequate financing stood between thousands of kidney failure patients and certain death, the House and Senate passed the measure with little debate and broad bipartisan support. (The Senate measure, put forth by Senator Vance Hartke, Democrat of Indiana, passed in a vote of 52 to 3 with 45 senators absent.) President Richard Nixon soon signed the bill into law.
The introduction of federal funding fueled an immediate and exponential expansion of dialysis clinics throughout the country and the simultaneous growth of the new kidney disease specialty, nephrology.
The physicians, health planners, and legislators who formulated the program in 1972 envisioned a small treatment cohort in which the “ideal patient” would be between 15 and 54 and “free of other irremediable disease, such as cancer, not suffer from severe arteriosclerotic cardiovascular disease, or severe hypertension.” By these criteria, the program would be applicable to only twenty percent of patients with advanced kidney failure, many of whom, they predicted, would ultimately receive kidney transplants, enabling them to cease dialysis treatment1. But restrictions to the program were not imposed, due to legal and ethical concerns. Thus, there were no limits or guidelines for enrolling patients. The subsequent program size and costs were grossly underestimated. Initial projections were for a yearly incidence rate of 55 new patients per million population. However, between 1980 and 2015, according to the United States Renal Data System, the actual incidence rate jumped from 72 to 373 per million population. While, in 1972, planners estimated the cost of the program would be approximately $121 million per year, by 2015, the actual ESRD program cost had ballooned to $34 billion and consumed a disproportionately large (7.5 percent) share of the annual Medicare budget. (Dialysis patients constitute approximately 1.7 percent of the Medicare population.)
No one would argue that Medicare funding care hasn’t brought great benefits to Americans with kidney failure. Hundreds of thousands of lives have been saved and – particularly those receiving kidney transplants – have been restored to health. But three fourths of patients with kidney failure do not receive transplants and instead undergo dialysis. Even in 1972, kidney specialists realized that dialysis was an imperfect treatment, a “halfway technology.” Since it provides only a fraction of normal body waste removal, patients never feel completely well and often suffer from fatigue, muscle cramps, poor appetite and other debilitating symptoms, and must maintain a stringently restricted diet. In recent years, accruing data from numerous studies have shown that dialysis is not a benefit for all, particularly frail elderly patients. A New England Journal of Medicine study in 2009 revealed that nearly 60 percent of nursing home dialysis patients had died within one year, while only 13 percent maintained their pre-dialysis functionality. Currently nearly half of patients receiving hemodialysis are 65 and older and 20 percent are over 75.2 Severe heart disease, dementia, and metastatic cancer portend a very poor prognosis and yet many such patients start hemodialysis as the “default” treatment offered by their physicians.
Kidney specialists prepare patients for dialysis and transplantation and play a large role in their treatment choices. The Medicare program rewards physicians for dialysis treatment but not for pre-dialysis or transplant care. The Medicare program compensates nephrologists with a capitated fee, ranging from approximately $188 to $388 per month. By contrast, for patients not receiving dialysis, office visits pay at a maximal rate of $148 per visit. This reimbursement disparity discourages preventive care while creating incentives to place patients on dialysis even before it becomes medically necessary.
Writing in 1980, the late Arnold Relman, then editor-in-chief of the New England Journal of Medicine, condemned the rise of giant, for-profit, health care companies, which he called “the new medical-industrial complex.” Pointing to the burgeoning hemodialysis industry as an example, “it may be more efficient than its non-profit competition,” he wrote, “but it creates the problems of overuse and fragmentation of services, overemphasis on technology, and…may exercise undue influence on national health policy.” Relman was prophetic. The dialysis industry has become a corporate behemoth. Over the past few decades, consolidations have resulted in two dominant for-profit global giants, Fresenius and DaVita, which together provide dialysis services to nearly 90 percent of patients in the US . In 2017, DaVita reported $10.9 billion in revenue and $1.8 billion in profits. Fresenius reported revenues of $20.1 billion in 2017 with profits of $3.27 billion.
Survival statistics for US dialysis patients lag well behind those of other industrial nations. Patients with kidney failure in the US have a substantially lower 5-year survival rate (41 percent) than either Europe (48 percent) or Japan (60 percent.) This is despite the fact that the European population is on average 2-3 years older, and Japan has far fewer kidney transplants, which are associated with lower mortality. Dialysis practices in the US are a likely reason for these differences. In recent years, longer dialysis times, which permit more gradual removal of fluid and fewer incidents of low blood pressure, have been associated with better outcomes. The US has the shortest dialysis times among developed countries, other than the Gulf states. This may in part be due to profit-driven care which dictates more rapid throughput of patients. Several recent studies demonstrate that for-profit dialysis facilities in the US have higher mortality , lower nurse-to-patient staffing ratios , and lower likelihood of referral for kidney transplantation . In an attempt to control costs, the Centers for Medicare and Medicaid Services has been steadily ratchetting down treatment payments, using a bundled payment system to dialysis clinics, which merges both treatments and expensive drugs infused during dialysis. But this continues to favor the large dialysis chains, which can squeeze out profits by economies of scale, lower staffing costs, and in the case of Fresenius, manufacturing its own dialysis equipment.
In 1973, only months after the Medicare amendment, a New York Times editorial, entitled “Medicarelessness” decried the rapid growth of the new kidney failure program, then projected to cost $1 billion per year within the next decade. “In a period when Congress is rightly fighting to protect its constitutional powers against White House usurpation,” the editorial stated, “society has the right to expect that legislators will know what they are doing and know the magnitude of the commitment they are making when they pass special interest legislation, whether for kidney disease sufferers or anybody else.”
In the decades since the Times editorial, Americans with kidney failure have greatly benefitted from Medicare funding. The above arguments are not to disparage the benefits of the program nor to denigrate publicly-funded health care in general. However, ballooning costs, suboptimal care, and perverse incentives for physicians and dialysis companies are problems that were unforeseen at the time of the program’s inception.
The lessons from this cautionary tale are the need for steps to insure an evidence-based rationale for expensive treatments and payment incentives which align with desired outcomes. The current fee-for-service payment system, which heavily rewards medical proceduralists over primary care providers, needs revamping. Robust comparative effectiveness research and expanded coverage for preventive services, both elements of the besieged Affordable Care Act, are also desperately needed. Without these steps, unbridled program growth with associated cost inflation and the further feeding of the for-profit “medical industrial complex” will result. Political leaders, Congress, and health planners will need to carefully consider such hazards.