Medicare

To control soaring Medicare costs, Congress has required that, in some cases, employer-sponsored group health plans covering Medicare beneficiaries pay medical claims before Medicare begins to foot the bill. Since 1981, such a requirement has been in place for patients with advanced kidney disease, which requires regular dialysis or a kidney transplant. The Omnibus Budget Reconciliation Act of 1990 (OBRA-90) extended the period during which these plans must pay before Medicare kicks in. The OBRA extension of the plans' obligation as primary payers has increased the amount that providers received for dialysis by an estimated $41 million per year. This increase occurred because employer-sponsored plans generally paid dialysis providers more than the cost-based Medicare rates. Although the additional revenue is relatively small when viewed in the aggregate, boosting total provider revenues for dialysis by about 1.8 percent, it represents pure profit for providers. The extension should not affect most kidney disease patients' out-of-pocket expenses because provisions insulate patients with dual coverage from being singled out for increased out-of-pocket expenditures.

GAO found that: (1) dialysis providers received an average of 80 percent more money when employer-sponsored plans acted as primary payer; (2) Medicare paid very little of the average that providers received; (3) the extension of the secondary-payer requirement increased provider revenues only 1.8 percent, but increased providers' profit margins significantly; and (4) the extension did not significantly increase beneficiaries' out-of-pocket costs, but ESRD patients could experience increased out-of-pocket costs if their employers limited dialysis coverage.