A February 2020 proposed rule from the Centers for Medicare & Medicaid Services (CMS) regarding the 2021 Medicare Advantage (MA) program included an important change that could have a significant impact on plans as it could increase membership of beneficiaries who are diagnosed with end-stage renal disease (ESRD).

The proposed rule states:  

since the beginning of the MA program, individuals with ESRD have not been able to enroll in MA plans subject to limited exceptions. Section 17006(a) of the Cures Act removed this prohibition effective for plan years beginning on or after January 1, 2021. 

This change to the MA program could have significant impact on plans if you think about all the ways in which it could increase the membership of beneficiaries whose health conditions include ESRD. While MA plans have been required to care for members with ESRD all along, the big question is how many new members with ESRD status will enroll in plans. For some plans with a lot of experience and established processes, this may not be so consequential from a cost-of-care point of view if it does not result in a significant increase in ESRD membership. For other plans without that background expertise, it raises a lot of questions that must be thought through.   

Nonetheless, even experienced MA plans, may find that changes in the rate payment methodologies and the ramifications of the risk adjustment models and bidding elements could alter the end effects on their resulting financial performance.  

The implications include wide ranging considerations for MA organizations, such as:  

  • Projected enrollment levels of new members with these diagnoses 
  • The expected costs of health care claims and the consequences to the medical loss ratio (MLR) 
  • The requirements for population health management strategies and care pathway development 
  • Provider network contracting strategies 
  • CMS bid elements, such as network adequacy 
  • The validity of CMS payment levels in the benchmark 
  • The validity of the ESRD risk adjustment model  
  • Product design challenges around maximum out-of-pocket (MOOP) levels and related trade-off factors of cost-sharing in the plan benefit packages (PBPs) and consequences to the overall membership’s value proposition 
  • The net impact on member satisfaction globally, as well as within the ESRD member cohort specifically  
  • Member onboarding and engagement strategies, tools, and techniques for transition of care 
  • The effective deployment of Special Supplemental Benefits for the Chronically Ill (SSBCI) for social determinants of health (SDoH)  

During this comment period before the final rate announcement on April 6, many MA organizations have submitted feedback to CMS and RISE has heard from member health plans about their concerns. No matter the final outcome of this input process, RISE believes that the larger issue is that CMS is challenging MA plans to come up with best practices to manage the complex chronic health conditions of this particular cohort of beneficiaries who not optimally managed under the Original Medicare program. 

It is important to note, however, that CMS recognizes the extraordinary cost of organ acquisition, and as such, is proposing to carve out this cost from the financial responsibilities of the MA organizations. Instead, like the cost of hospice for example, those expenses will be paid through the Medicare fee for service (FFS) program and will be eliminated from the benchmarks and capitation premiums.  

Expected costs of caring for members with ESRD 

In a commentary published by the US Renal Data System (USRDS)*, the assessment of the costs involved in caring for ESRD patients is disproportionately high, albeit for a relatively small percentage of the total Medicare population. As noted in the second paragraph below, the transplant costs are far lower than the ongoing dialysis expenses for either peritoneal dialysis (PD) at home or in facility-based (HD) dialysis. 

total Medicare fee-for-service spending in the general Medicare population increased by 2.1% in 2016 to $500.5 billion. The spending for ESRD patients of $35.9 billion accounted for 7.2% of the overall Medicare paid claims in the fee-for-service system, a share that has remained approximately constant during the current decade. (p. 53) 

Between 2016 and 2017, total spending on PD increased by 3%, as the share of patients receiving PD continued to rise. However, while growth on PD spending on a PPPY basis also increased slightly between 2016 and 2017 (1.6%), it remained less costly on a per-patient basis in 2017 ($78,159) than HD ($91,795). Finally, transplant spending in 2017 increased from 2016 levels by 3.8% in total and 2.1% in PPPY expenditures. In 2017, the PPPY cost for transplant patients, $35,817, remained far lower than spending for either dialysis modality. (p. 57)

Given this backdrop, even after the CMS proposal to carve out the costs of transplantation, there remains an extremely high net level of expected annual costs per member with ESRD. Having robust care pathways and population health strategies in place are indispensable 

In addition, individuals with chronic kidney disease have always been eligible to enroll under the provisions of the regulations governing the MA program. The bigger picture here is that it is incumbent on MA plans to anticipate the progression of those health conditions to avert as much suffering and deterioration as possible. The stages and phases of advancing chronic kidney disease (CKD) and the associated costs and care management required for co-morbid conditions are enormous and predictable. As a progressive disease, USRDS notes that CKD advances in stages and is noted below as a “multiplier” of costs when combined with other chronic conditions such as hypertension (HTN), heart failure (HF), and diabetes (DM). 

USRDS also notes the following information regarding spending for CKD and related chronic comorbidities: 

Beneficiaries aged 65 and older examining FFS Medicare spending reinforces CKD’s reputation as a cost multiplier. Beneficiaries with recognized CKD represent 14% of the point prevalent aged Medicare population, yet accounted for 25% of total expenditures (Table 3). We examined 2017 costs in relation to beneficiaries’ CKD stage, age, sex, race, and concurrent disease, focusing on DM and HF. These conditions, in addition to CKD, represent some of the costliest chronic disease populations for Medicare. For example, HF affects 9% of beneficiaries in the FFS Medicare population, but accounts for 20% of expenditures. Thirty-five percent of overall expenditures were directed toward the 24% of beneficiaries with DM. In those aged 65 and older, per-person per-year (PPPY) costs were 87% higher for patients with CKD only, versus those with no CKD, DM, or HF ($16,112 vs $8,620). Costs for those with CKD and DM were 51% higher than for those with DM only. Similarly, expenditures for those with CKD and HF were 47% higher than for those with HF alone. For beneficiaries with CKD, HF, and DM, costs were 43% higher than for those with only HF and DM. Overall, people with diagnoses of any condition of CKD, DM, and/or HF accounted for one-third of the Medicare aged 65 and older population, but over half of total programmatic costs. 

It is obvious that care coordination and the population health management capabilities of MA organizations are better suited to rise to the challenges of managing these populations than a setting that lacks these types of tools. The crucial factor is to intervene earlier in the disease cycles of the patients with these health conditions to improve their health status and the prospects of averting some of the predictable consequences of more advanced morbidity and mortality.  

To the extent that the MA industry can use some of the new benefit tools available to them through recent CMS regulatory changes (the introduction of health-related supplemental benefits in 2019 and SSBCI supplemental benefits for 2020), Medicare plans are better positioned to adapt, innovate, and develop new models of care.  

Implications for data capture and reporting for risk adjustment, Stars, and population health management 

As mentioned above, it would be a mistake to only focus on the needs of the members already diagnoses with ESRD. In practical terms, moving “upstream” to identify and intervene earlier in the natural progression of the CKD conditions, is critical. Data capture and reporting will necessitate having processes in place to monitor lab data and values, going beyond limited encounter streams, and instead looking at nutritional levels (eGFR lab values, serum albumin levels, dietary care), anemia scores (hemoglobin, ESA use), lipids levels(total cholesterol, LDL), and diabetes (HbA1c) values.   

This emerging requirement, in turn, has implications for adoption of sophisticated technologies to capture, read, and report unstructured data in medical records (e.g., machine learning, natural language processing, and artificial intelligence). The next logical requirement, of course, is how this information is shared, interpreted, reported, and stored.   

Issues for payment rates and risk adjustment 

The 2020 Rate Announcement and Call Letter makes the following statement regarding the 2020 Part C risk adjustment model: 

The 21st Century Cures Act requires CMS to make adjustments to the risk adjustment model to take into account the number of conditions an individual beneficiary may have, and to make an additional adjustment as the number of conditions increases. For 2020, CMS is finalizing implementation of the alternative payment condition count model that includes additional condition categories for pressure ulcers and dementia, as well as additional variables that count the number of conditions a beneficiary may have (among those that are in the risk adjustment model, or “payment conditions”), and makes an adjustment as the number increases. 

CMS began implementing the risk adjustment requirements in the 21st Century Cures Act in Payment Year (PY) 2019, by utilizing a risk adjustment model with additional factors for substance use disorder, mental health, and Chronic Kidney Disease (CKD) diagnoses. Further, the 21st Century Cures Act requires that CMS fully phase in the required changes to the risk adjustment model by 2022. We are therefore beginning the phase in of this new model in 2020, starting with a blend of 50 percent of the risk adjustment model first used for payment in 2017 and 50 percent of the new risk adjustment model. 

The ESRD risk adjustment model and Rate Normalization elements involve ESRD dialysis and ESRD functioning graft models. The dialysis rates are set at statewide levels, so there is some concern about the impact on local plans because the rates are averaged across a much larger geography than their local service areas.  Also, it is not yet completely transparent to plans how these risk adjustment models were developed and what their use will do to the ultimate payment rates.Page BreakWhat does this mean for the annual CMS bid calculation? 

As mentioned earlier, risk adjustment models hold some unknowns for plans as well as the ultimate benchmarks used in the bid process. Beyond these, of course, there are other important factors to considewhile building the models for the bids:   

  • Assumptions about enrollment of new membership with ESRD diagnoses. What are reasonable assumptions to make?  With only 1 percent of total eligible Medicare beneficiaries currently having the ESRD diagnosis, will the enrollment level be low?  Or will the favorable out-of-pocket costs of MA plans become a magnet for adverse selection?  
  • Network adequacy requirements. it is not yet certain what CMS will require in terms of provider networks for the bid. While current networks contain dialysis services, will an unknown level of increase in ESRD incidence boost the bar for network adequacy?  
  • Duopolistic dialysis providers. How will the fact that two large national dialysis chains hold so much market share impact pricing?   
  • How to deal with the CMS regulation raising the maximum level of out-of-pocket costs? While setting the MOOP levels every bid season requires careful thought and calculation, the ESRD factor takes this concern to a higher level. No MA plan wants to be positioned as the most attractive option for new members with ESRD, so what impact would raising the current MOOP level have on the other current members without ESRD and potential new members also without ESRD?  
  • How to use available supplemental benefit options to manage care?  This is an opportunity to collaborate with care management to employ new flexibility provided by CMS in the way that was envisioned to improve care outcomes for certain population cohorts enrolled in the plan.  

Are there strategies to cope with these considerations that will mitigate against some of the potential risks of product design decisions? For example, are there options to put together capitation contracts or carve outs for dialysis, or are there alternative providers coming to the market?  

One of the thorniest care management issues is the fact that the nephrologist at the dialysis center is the one physician that the ESRD member sees most frequently, yet most nephrologists are not prepared to fully serve as primary care providers in the traditional sense. However, there are best practice examples in certain geographies where alternative management scenarios have developed. In the longer term, the change in the eligibility of ESRD beneficiaries to enroll in MA plans might be the impetus to change the paradigm of traditional management patterns for dialysis patients.  

Satisfaction levels of MA Plan members with ESRD 

It remains to be seen how Medicare beneficiaries with ESRD diagnoses will act on the new opportunities available to them to enroll in MA plans. However, that turns out to be, the MA plans are obliged to consider their processes and workflows from the very beginning in the marketing and sales cycles, to onboarding of new members, ongoing customer service, population health management services, and ultimate retention. If the new members feel that they are receiving high quality care, that they were brought on board as members in a caring and supportive manner, and their plan is providing top-notch service, there will not be any problems with the CAHPS scores.  As CMS plans to further elevate and weight customer satisfaction in the Stars Bonus Program, the investment in this end-to-end process review will earn rewards in Stars scores. However, failures in this area could have particularly damaging impact on Stars, given the policy direction now contemplated by CMS.   


From the comments and opinions expressed above, it should be clear that RISE considers the policy shift around ESRD represents an important public policy development that calls on the MA program to step up to the plate and come up with better care and financing models for challenging sub-populations in our U.S. health care system. As managed care organizations have become increasingly favored by states struggling with the cost and quality of care for the Medicaid populations, we have also witnessed a continuing desire to create models of care for the dually eligible populations, as well. The ESRD policy does not come out of nowhere: it is part of a trend in government sponsored health care to turn to coordinated care plans to solve what is so obviously broken in the old FFS model.  

Some worry that recent CMS pronouncements mean that the Medicare Stars program will be drastically weighted toward customer satisfaction. However, the combined HEDIS®/HOS/CAHPS/ administrative scores still uphold the public accountability of MA plans to provide high-quality health care that is also cost effective while maintaining high levels of satisfaction. In the long run, this accountable model represents a dramatic demonstration of an alternative to what is wrong in American health care.  

RISE believes this industry will figure out the puzzling parts identified in this article and then will innovate to show that this approach can ultimately deliver on the promise of value-based care for some of the neediest and deserving patients we have among us.  

*United States Renal Data System. 2018 USRDS annual data report: Epidemiology of kidney disease in the United States. National Institutes of Health, National Institute of Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 2018. 
The data reported here have been supplied by the United States Renal Data System (USRDS). The interpretation and reporting of these data are the responsibility of the author(s) and in no way should be seen as an official policy or interpretation of the U.S. government.