Promise or peril? impact of the medicare drug benefit on the ESRD population

Previous medicare drug coverage 

In 2003, Medicare provided health-care coverage for the elderly and disabled for a total cost to the taxpayer of $263 billion. Along with inadequate protection against lengthy, high-cost hospitalizations and the slow Medicare approval of new diagnostic tests and procedures, the failure to provide drug coverage has been one of the major problems with Medicare. With over 80% of recipients receiving traditional fee for service, Medicare has covered the costs for beneficiaries almost exclusively for medications administered within the hospital setting. For over a decade, Medicare beneficiaries have increasingly sought supplemental drug coverage.10 The major sources of supplemental prescription coverage for Medicare beneficiaries are medicare health maintenance organizations (HMOs), retiree health-care plans, and Medigap supplemental insurance policies. At ESRD initiation, 5% to 10% of patients have Medicaid only and 10% to 20% have both Medicare and Medicaid (Fig 2). Whereas Medicare, in fact, covers almost 400 out-patient drugs, these are primarily cancer treatments or medications administered to the patient in a physician’s office. Even before recently passed drug reform legislation, the Bush administration was beginning to weigh government cost as a factor in determining whether Medicare would pay for new drugs. For example, the federal government refused to pay the full asking price for the anemia drug Aranesp, cutting payment for cancer patients by 39%. One year ago, Medicare began to adopt a new policy of coverage decisions based on “functional equivalence,” preferring cheaper generic or brand drugs when available. Federal officials interpreted Medicare law as providing them with powerful discretion to set payment for drugs based on what they deem to be equitable. The new Medicare law prevents the Center for Medicare/Medicaid Services (CMS) from declaring that 2 products are “functionally equivalent” for the purposes of reimbursing medications at the same level.

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Figure 2. Patient distribution by insurance coverage at initiation of ESRD by race and ethnicity. M&M, Medicare and Medicaid; M/caid, Medicaid only; M/care, Medicare only. Patients with Medicare coverage accompanied by employer-based or other insurance coverage are more likely to be white, whereas minority populations are more likely to have Medicare/Medicaid or no insurance coverage. The data reported here have been supplied by the United States Renal Data System (USRDS).15 Interpretation and reporting of these data are the responsibility of the author and in no way should be seen as an official policy or interpretation of the United States government.

The Drug Reform bill 

The Drug Reform legislation of 2003 was the most expensive expansion of Medicare since its creation in 1965, with a projected cost of $400 billion over 10 years. It provides some relief from the high prices of prescription drugs, with a new taxpayer-subsidized drug benefit to elderly and disabled Medicare beneficiaries. Even at $40 billion a year, however, the bill will cover only a fraction of consumer drug expenses, still leaving beneficiaries to face substantial drug costs. Although it promises protection against catastrophic drug expenses, establishing in theory a limit of $3,600 a year on out-of-pocket expenses, the new legislation is expected to reimburse only about one-third of the total out-of-pocket drug costs for the typical Medicare recipient. In a given year, the beneficiary would pay the first $250.00 plus 25% of drug expenses from $251.00 to $2,250.00, plus 100% of the next $2,850.00. Because of the huge coverage gap in the middle, the beneficiary would face the peril of paying $3,600.00 of the initial $5,100.00. After that, the standard benefit would pay 95% of the cost of each prescription.

The peril of greater cost to the individual patient could also come from other directions, and these costs may offset any cost-saving measures achieved by Medicare for the taxpayer and beneficiary. For the beneficiary, this mix of other concerns will include Medicare deductibles, premiums, and benefit caps. Furthermore, no private “Medigap” drug policies will be allowed by the legislation. Another peril is a worsening of the price for individual drugs. The drug benefit program will be administered privately; that is, Medicare will not directly implement delivery of drugs. Instead, prescription medications will be distributed by private insurance companies or by specialized drug distribution companies. Each entity will have to bargain separately for the best drug values, bringing differential cost savings and the potential for unequal access by beneficiaries across the country.8

Data confirm that the complexity of end-stage renal disease management results in consumption of more medications than in non-ESRD Medicare beneficiaries. Prevalent dialysis patients are prescribed an average of 8 to 11 outpatient medications on a chronic basis,9, 11 with more medications prescribed as the number of secondary payers increases (Fig 3). Another peril amid the promise is the likelihood of increasingly restrictive drug options. Will the legislation in fact limit coverage of drugs for beneficiaries? Each plan could have its own list of covered formulary drugs and prices. Incentive-based or tiered formularies with lists of preferred drugs, often less costly drugs with no generic substitute available, are allowed by the prescription drug benefit.12 Furthermore, off-formulary medications will not be counted toward the $3,600 out-of-pocket expense limit.

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Figure 3. Prescription drug use in ESRD Medicare beneficiaries, by presence of secondary insurance. Reprinted with permission from Shih.9

Insurance coverage for ESRD patients 

Medicare started the ESRD program as Public Law 92–603 in 1973 as a result of the 1972 Social Security Amendments.9, 13 For the ESRD dialysis patient already on Medicare, the primary insurance role is assumed by Medicare at the time of initiation of renal replacement therapy. Otherwise, Medicare coverage begins at 90 days after initiation, with Medicare becoming the secondary payer if another primary insurance exists; after 3 years, Medicare coverage becomes primary.14 Among the ESRD population, Medicare is the sole or primary source of payment in about 80% pf patients, with Medicaid ranked second as the sole or primary source of payment, for under 10%. Other payers, including private insurance, HMOs, and the Veterans Administration, are primary for about 10% . Fewer than 5% have no insurance or are self-pay.9 Insurance coverage of incident ESRD patients according to the 2003 United States Renal Data System (USRDS) is shown in Figure 2. The highest proportion of ESRD patients covered solely by Medicare is found in the South and along the East Coast.15

ESRD is an increasingly high-cost illness. Although patients with ESRD represent only 0.79% of all Medicare beneficiaries, care of ESRD patients accounts for 7.30% of all Medicare expenditures.16 At the time of passage of drug reform legislation, only 2 independent categories of outpatient prescription drugs were covered by the Medicare ESRD program: immunosuppressive medications for the kidney transplant recipient, and erythropoietin, used to treat anemia in dialysis patients.9 Coverage of immunosuppressive drugs began with the passage of the Omnibus Budget Reconciliation Act (OBRA) in 1986, in response to increasing transplant drug costs,17 but applies only for transplant recipients with Medicare as the primary or secondary payer. Coverage for transplant medications was subsequently extended to a full 3 years of Medicare eligibility after a successful transplant for ESRD beneficiaries and for the life of the graft for aged and disabled beneficiaries with a Medicare transplant. (Of note, the Secretary of Health and Human Services is required by law to report to Congress no later than January 2005 with recommendations for providing benefits under Part D [the new drug benefit] for outpatient drugs presently covered under Medicare Part B). The financial burden of immunosuppressive medications has increased over the past decade, with the introduction of new drugs such as mycophenolate mofetil.18

Coverage of prescription drugs is among those items and services provided to beneficiaries of Medicaid by all states in the U.S., although the provision is optional.10 Spending by Medicaid programs on prescription drugs increased annually by more than 16% between 1990 and 2000 and are expected to increase another 14% annually over the next decade. Experiencing worsening fiscal crises, states are using multiple strategies to hold down the growth of expenditure on drugs. The highest proportion of the population covered solely by Medicaid at the time of initiation resides in California and Arizona, parts of Washington and Oregon, and along the Gulf Coast and Atlantic seaboard.

Hypertension and ESRD 

In the general population, treatment of hypertension has led to a remarkable decline in cardiovascular disease over the past half century, establishing itself as one of the few medical interventions to have an impact on mortality trends.19 The prevalence of hypertension is high in patients with chronic kidney disease.20 Hypertension may be documented in over 80% of adult hemodialysis patients, unrelated to age, and is a major modifiable risk factor for cardiovascular disease, the leading cause of morbidity and mortality in patients with ESRD.21 Cardiac disease is almost 4 times more likely in hypertensive patients compared with nonhypertensive patients.22 Hypertension is associated with increased risk of left ventricular hypertrophy, coronary artery disease, congestive heart failure, and cerebrovascular complications.23 Volume expansion and increased systemic vascular resistance are dominant causes of ESRD hypertension.24

Hypertension control constitutes a fundamental area of drug intervention in ESRD patients.25 The 3 most prescribed drug types in hemodialysis patients in general are related to calcium/phosphorous metabolism, hypertension, and anemia.2 The prescription of antihypertensive agents, regardless of drug category, is associated with reduced age-adjusted mortality in ESRD patients.26 Hypertension frequently necessitates the use of several antihypertensive agents. Unfortunately, there is a lack of prospective, randomized clinical trial data and a lack of consensus regarding the pharmacologic treatment of the ESRD patient with hypertension.27 Furthermore, despite recognition of its prevalence and the frequent use of antihypertensive drugs, hypertension is controlled in only 30% of ESRD patients.3 Previous studies have established a role for beta-blockers and renin-angiotensin block in the ESRD population. In a recent study of almost 3,000 incident hemodialysis and peritoneal dialysis patients in the United States, calcium channel blockers were the most frequently prescribed antihypertensives, being prescribed more than twice as often as beta-blockers or angiotensin-converting enzyme inhibitors in ESRD patients, even in those with cardiovascular disease.27 In addition, calcium channel blockers were associated with reduced all-cause mortality.

Conclusion 

The Medicare Prescription Drug act of 2003 carries both promise and peril for the ESRD patient. The greatest potential peril is inadequate allocation of funds for the program,10 minimal cost savings (and, for some, greater cost to bear) for the individual, restriction of drug formularies, and the cost of drugs not held in check. Other possible concerns include the fate of dual eligible (Medicare and Medicaid) patients, for whom Medicare will assume drug costs from Medicaid; the fate of senior drug programs presently operated by some states; future restrictions on choices of medications, as well as likely premium increases if the 10-year budget estimate is surpassed; and the fate of employer-based retiree coverage.

The promise is of broad benefit to the majority of ESRD patients, who already are Medicare entitled, regardless of age or disability. The potential is improved medical management for chronic but treatable comorbid conditions such as hypertension and cardiovascular disease. Whether the majority of Medicare beneficiaries who do have additional coverage will fare better or worse financially under the new system is unclear. The future status of the program, after the 2006 implementation, will depend, in part, on which political party controls the White House. The promise and peril of the benefit for the large ESRD population awaits more complete analysis, as the details of the program become clearer.