Beginning next year, more than 300,000 Medicare beneficiaries with ESRD, who have been previously limited to fee-for-service (FFS) will have the opportunity to enroll in MA—impacting a wide range of parties including patients, health plans, dialysis facilities, and physician practices.

Changes to Network Requirements

The Centers for Medicare and Medicaid Services (CMS) finalized a significant shift in how MA plans contract with outpatient dialysis facilities. Prior to this regulation, MA plans needed to include a sufficient number of dialysis facilities in their networks to ensure enough providers are located reasonably near most enrollees (often referred to as “time and distance” requirements).

In the final rule, the CMS departed from this policy and removed outpatient dialysis facilities from the types of providers that must meet time and distance requirements and instead will require each MA plan to attest “that it has an adequate network that provides the required access and availability to dialysis services, including outpatient facilities.” The CMS stated in the final rule that they received comments from stakeholders who are concerned that “providers in concentrated areas may leverage network adequacy requirements in order to negotiate prices well above Medicare FFS rates,” and by finalizing this change argued that MA plans will be encouraged to contract with all types of dialysis providers.

In practice, this change will still allow MA plans to contract with outpatient dialysis facilities, but if an enrollee receives dialysis services from a facility that is not in-network, the MA plan would be required to pay the facility FFS rates. As a result, plans are more likely to reimburse facilities at lower rates than anticipated before this change, but the lack of formal network could raise questions about availability of dialysis services. Stakeholders should examine how this change may impact access to both facility and in-home dialysis services, the financial impact to both plans and providers, and any change in the expected number of beneficiaries with ESRD who may enroll in MA starting next year.

Medicare Advantage vs FFS: Differences in Payment and Patient Populations

A recent examination of the ESRD enrollment in both Medicare FFS and MA, under a research-focused data use agreement with the CMS, revealed significant financial and demographic insights relevant to payers and providers. The data reflects the potential financial pressure plans may face, depending on their geographic locations, as well as demographic differences of future ESRD enrollees compared to those currently enrolled in MA plans through several long-standing Medicare exemptions.

MA Payment Adequacy

Currently, MA plans receive payment for their existing ESRD patient populations through a methodology that differs substantially from that used for non-ESRD enrollees. Payments to MA plans for ESRD patients are established at the state level rather than at the county level. As a result, ESRD payments do not consider cost variation within a state—e.g., at the local, county, or regional level. Additionally, changes in the MA ESRD payment rate vary significantly from year to year, creating uncertainty over time.

Avalere analyzed CMS data from 2018 to assess how payments to MA plans set by the current MA payment methods in metropolitan statistical areas (MSAs) with higher numbers of ESRD patients compare to FFS costs of ESRD patients. The study determined that in the top 15 MSAs with the most ESRD patients enrolled in FFS, 10 had ESRD FFS costs that exceeded the MA payment rate. Across the MSAs, MA payments fell below FFS costs by amounts ranging from 2% to 12%. Conversely, 5 MSAs had a MA benchmark that exceeded FFS costs by 1–9%.

Many of regions reviewed are among the most populous in the country and have high overall MA penetration rates. Significantly, the MSAs with the most ESRD beneficiaries enrolled in FFS—New York, Los Angeles, and Chicago—all had FFS costs that exceeded the MA ESRD benchmarks. This trend also was present in other large, urban MSAs, including Philadelphia, Houston, and Miami.

The payment deficits were not limited to urban settings: Rural areas in Iowa, Minnesota, North Dakota, Nebraska, and Ohio also were paid between 2% and 5% below the benchmark. Of the total number of beneficiaries living in MSAs included in this analysis, 45.6% live in MSAs where FFS costs exceed the benchmark payment amount.

Stakeholders should consider how these payment differences are relevant to the recently announced changes to network adequacy. Further, in stating why the agency did not make major changes to payment in the Final Rate Announcement in April, CMS stated major changes should be proposed and be subject to a public comment period. If stakeholders are advocating for changes to how MA plans are paid for ESRD patients, proposals should be finalized and presented to the CMS well before the plan year 2022 regulatory cycle.

Demographic Differences

Along with examining reimbursement rates, Avalere also made demographic comparisons between ESRD patients enrolled in MA plans and those enrolled in FFS during the 2015 plan year. The comparisons revealed some key differences:

While some MA plans have experience managing the ESRD population because of current enrollment, differences in patient characteristics among ESRD patients enrolled in MA and those in FFS may result in differences in costs, comorbidities, and the types and intensity of services used. Avalere’s analysis did not look at utilization patterns of the 2 groups. However, the differences in the proportion of duals status suggest the underlying costs of the 2 populations may differ.

Understanding the differences between the MA enrollees and the FFS population will help both health plans and providers better prepare for the 2021 transition. In addition, understanding what proportion of ESRD patients enrolled in FFS today is likely to enroll in MA in 2021 in specific markets will help assess the impact of the coming change.

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