Debate Over Third-Party Payments for Dialysis Patients Revived in Washington as Calif. Eyes Limits

The fight over third-party premium assistance for dialysis patients is heating up this week in California and Washington, D.C. as employers and labor unions get involved.

The broadening interest in the issue shows the mounting financial stakes for the insurance and dialysis industries. The focus has expanded from dialysis patients in the Obamacare individual market to those in the employer market. The sheer market size of dialysis giants DaVita and Fresenius means commercial insurers often pay at least double the Medicare rates.

Lawmakers in the California Senate health committee will vote Wednesday on a measure that would crack down on third-party premium assistance for dialysis patients. This would have a hefty impact in a state that has seen a huge spike in kidney patients in the past decade. Nearly 140,000 Californians received dialysis in 2016 according to the Office of Statewide Health Planning and Development.

The California bill by Democratic state Sen. Connie Leyva would strictly limit most third-party groups—excluding tribal organizations, government entities or AIDS clinics—that want to subsidize private exchange premiums for a patient. A not-for-profit or other organization that wants to offer premium assistance would have to guarantee help for a full year and certify that the patient isn’t eligible for Medicaid or Medicare. Providers that don’t comply with the new mandates would be reimbursed at the Medicare rate for their patient’s services.

While the legislation also takes aim at sober homes involved in kickback schemes for addicted patients, the political focus appears to be trained on the dialysis component.

The bill has the backing of insurers and insurance groups including Blue Shield of California and the Association of California Life and Health Insurance Cos. America’s Health Insurance Plans has sent a letter of endorsement. Powerful labor groups including the Service Employees International Union of California are batting for the bill too.

Significantly, the proposed legislation brings federal scrutiny of DaVita and Fresenius—and their financial support from the American Kidney Fund, a not-for-profit that offers charity premium assistance to end-stage renal disease patients on dialysis—to the nation’s most populous state.

Labor groups and insurers have blasted the American Kidney Fund’s ties to DaVita and Fresenius, arguing that the organization’s charity payments are funneled to commercial insurers in order to secure the higher reimbursement rates for their dialysis patients who otherwise qualify for Medicare and Medicaid.

The American Kidney Fund has said it offers financial help for patients on Medicare, Medigap and Medicare Advantage plans as well as for people in the commercial markets. It has called Leyva’s bill “nothing more than a thinly veiled attempt by large health insurance companies to kick kidney patients off their insurance plans.”

California is one of two states that specifically bar end-stage renal disease patients under 65 from supplemental Medicare coverage, known as Medigap, which complicates the impact of Leyva’s bill. Medicare pays for 80% of all treatments including dialysis, leaving kidney patients on the hook for 20% of the cost.

The role of employer plans in the third-party payment issue has brought more stakeholders into the debate including AHIP, the Blue Cross and Blue Shield Association, ERISA Industry Committee, Families USA, National Alliance of Healthcare Purchaser Coalitions and the Service Employees International Union. The coalition wrote a letter to HHS Secretary Alex Azar Tuesday urging him to re-issue an Obama administration rule that would let insurers bar patients qualified for Medicaid and Medicare from receiving commercial coverage with premium assistance. A federal appeals court blocked the rule in January of last year and the Trump administration hasn’t appealed the decision.

The coalition in its letter argued that DaVita, Fresenius and other dialysis companies profit from the “inappropriate steering” of Medicaid and Medicare dialysis patients into private coverage through third-party payments, citing a J.P. Morgan analysis that showed DaVita raked in $450 million in operating income per year via premium assistance for patients in the employer market. Insurers alleged they lost $1.7 billion due to individual market premium assistance caused by a “gaming” of the ACA’s guaranteed issue.

Disclosures show that third parties are also “urging individuals to elect COBRA coverage” to keep higher provider reimbursement rates, the coalition claimed.

American Kidney Fund President LaVarne Burton hit back on Tuesday with an open letter to Azar that said the coalition letter was full of “misleading statements, omissions, half-truths and outright falsehoods,” aiming to limit coverage options for kidney patients “by forcing them off private insurance and onto government health programs.”

“This letter should send a chill down the spine of every person with a chronic disease,” Burton said in a statement. “Which disease will be rejected by insurers and employers for health coverage next—cancer, diabetes, obesity or asthma? Because they won’t just stop with kidney failure.”

Whatever Azar’s action, the debate won’t end any time soon. In January 2017, the U.S. Justice Department under President Barack Obama slapped DaVita and Fresenius with subpoenas over their ties to the American Kidney Fund and in the fall of 2017 DaVita released a report detailing how much financial help the American Kidney Fund had offered its patients.

The company said that as of the date of the analysis, about 25,000 of its patients received “support” from the American Kidney Fund. Of those, about 1,800 got premium assistance for individual coverage on and off the ACA exchanges.

Leyva in discussing her bill conceded the complications of the third-party payment issue. However, she told Modern Healthcare, the proliferation of dialysis clinics shows that “there’s money to be made” in using premium assistance to draw patients into commercial health plans.


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