The Los Angeles Times published an article on October 11, 2018 that should be required reading for all employee benefits professionals. The article, entitled “How profiteering by the same dialysis firms trying to kill Proposition 8 almost destroyed Obamacare,” is written by Pulitzer Prize-winning reporter Michael Hiltzik and takes a hard look at dialysis care in the U.S.
The headline might lead a reader to think the story is about a direct-ballot issue in California and Obamacare. However, the article is REALLY about the strategy of dialysis companies to maximize their reimbursement from employers. I say employers, because exorbitant dialysis claims costs incurred by insurance carriers are passed on to fully-insured employers OR in the case of self-funded employers, they are directly paid by the group.
Summary for Dialysis Strategy in Eight Points:
- Patients with end-stage renal disease (i.e. kidney failure) require dialysis three days per week to live
- 70% of the dialysis market is dominated by only two companies: DaVita and Fresenius
- Insurance carriers pay these dialysis companies between $2,000 and $4,500 per dialysis session, while Medicare only pays $260 per session
- After approximately two years of dialysis, patients are eligible for Medicare because they are considered disabled
- Aetna sued DaVita, alleging DaVita intentionally incentivized patients to stay on private insurance and NOT move to Medicare. Moving to Medicare would drastically lower the reimbursement to DaVita AND lower the cost to employers
- Dialysis companies carryout this incentive through the American Kidney Fund, the leading U.S. non-profit working on behalf of the 30 million Americans with kidney disease, providing support and resources
- Dialysis companies donate more than $200 million a year to the Fund and in turn, the American Kidney Fund pays the insurance PREMIUMS FOR eligible patients. According to the article, “The fund told [the reporter] its charitable grants are agnostic to the type of insurance a patient has and which provider a patient chooses.”
- DaVita disputes Aetna’s claims
Important Side Note: Warren Buffett and Berkshire Hathaway are one of the largest shareholders of DaVita. Berkshire Hathaway has also formed a high-profile, non-profit organization with Amazon and JP Morgan Chase to lower healthcare costs.
These relationships appear to be a potential conflict of interest for Berkshire Hathaway. DaVita and Berkshire Hathaway have a fiduciary responsibility to their shareholders to maximize profit—i.e. increase costs for employers and insurers. Meanwhile, the non-profit partnership of Berkshire Hathaway, Amazon and JP Morgan Chase is trying to lower the cost of healthcare for employers. One of the two sides has to suffer.
What This Means for Employee Benefits Professionals
- Having a plan member on dialysis can spell financial disaster for employee health plans
- People and organizations have intentionally created this financial disaster to maximize revenue and shareholder return
- Some self-funded employers have begun to use a separate Medicare-Cost Plus “network” for dialysis claims payment—in a manner that is compliant with regulations
- Other employers use a service to help move plan members on dialysis to Medicare as quickly as possible
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