Did Medicare’s Payment System Raise the Cost and Lower the Quality of Kidney Dialysis?

Many of the problems in U.S. health care are the direct result of the way Medicare pays for things. The payment system adopted by the Medicare End Stage Renal Disease program at its creation in 1973, for example, was likely responsible for radical changes in the way dialysis was performed. It fueled the expansion of stand-alone centers, an option that had been tried and found both more costly and less convenient. Had Medicare subsidized patients directly using a Cash & Counseling arrangement, it is likely that today’s kidney dialysis would cost less and be more convenient.

As Christopher Blagg tells the story in Replacement of Renal Function by Dialysis (Claude Jacobs, ed. 4th edition, 1996), the first free-standing dialysis center opened in Seattle in 1962. Once a reliable arterial pressure monitor became available, it became possible to do overnight home dialysis. This helped people lead more normal lives. It was more convenient because the patient could sleep at least some of the time.

The University of Washington team quickly determined that home dialysis was much less expensive than outpatient or hospital dialysis because it “did not require nursing staff.” The Seattle Artificial Kidney Center developed a home hemodialysis training program. The Center’s Board of Trustees determined that this would allow its limited funds to treat more patients, and it pioneered the notion of “home hemodialysis helpers.”

Because the Center did not have to play “Mother may I” with gaggles of government bureaucrats, home dialysis spread quickly. Survival rates in home dialysis were reportedly “at least as good, and probably better than survival with other dialysis modalities.” Blagg notes that “home dialysis patients had a better quality of life and were more frequently judged to be rehabilitated than were patients treated by outpatient dialysis.” There was also less exposure to potential sources of infection.

Because pricing and staffing were free from bureaucratic control, home dialysis even adjusted to the change in family structure caused by the entry of women into the labor market. It did so without needing additional subsidies or government programs for workforce development. As Blagg tells the story:

Another home hemodialysis development pioneered in Seattle was the use of paid dialysis helpers. In the 1960s and early 1970s home hemodialysis was usually done by the patient with assistance from their spouse, other family member or a close friend. However, with increasing return of women to the work force and other changes in family structure and society, spouses or family members often were not available or willing to undertake the responsibility of helping with dialysis. The answer to this problem was to have the patient hire a home dialysis “helper” to assist them. The helper was trained with the patient to do safe dialysis just as family members were, and no effort was made to have the helper become a trained dialysis technician. The helper worked for the patient as an independent contractor, and was reimbursed for their time through the patient. This proved to work extremely well and allowed many patients to do home hemodialysis who might not otherwise have been able to do so…The proportion of patients treated by home hemodialysis peaked in the early 1970s. In 1971, some 42% of the 10,000 or so dialysis patients were on home hemodialysis.

These promising developments came to a screeching halt in 1973 when the US government decided to help kidney failure patients. Rather than providing patient vouchers for ESRD care, it imposed the Medicare payments system on the market for dialysis. And, inevitably, Medicare pricing czars failed pricing 101. As Blagg puts it:

…[they] provided much more generous funding for outpatient dialysis than for home dialysis. This led to a rapid proliferation of dialysis units across the country, vastly improving patient access to treatment, but at the same time leading to the decline in the use of home hemodialysis…

Comments (6)

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  1. Joe S. says:

    I can’t think of anywhere in the health care system where government payment isn’t screwing things up.

  2. Vicki says:

    Linda, I like your suggestion of patients controlling the money. Has that ever been seriously considered in Washington?

  3. Devon Herrick says:

    Kidney dialysis is so costly that (despite a shortage of available kidneys) transplantation is considered less expensive in the long run than dialysis. People who undergo dialysis are faced with poor quality of life. Moreover, it’s inconvenient to be tethered to a machine hours at a time several days a week.

    What strikes me as odd is that it doesn’t need to be inconvenient. The process is really very simple. Dialysis is little more than a machine that looks like an old reel-to-reel tape recorder that squeezes the patient’s blood through a tube, pushing it through a type of filter before returning it to the body. Were the process not driven by bureaucracy, diabetics would all have portable machines they use at home while they would use at night while asleep. That is currently possible (with better outcomes) but most people cannot afford the $25,000 price of the machine. If Medicare money was not the exclusive funder, I suspect the machines would be far cheaper than the price of a new car.

  4. Ken says:

    The answer to your question is “yes.”

  5. steve says:

    Did you talk with a physician before writing this? The patients on dialysis in the 60s were much different. You had to be fairly healthy, other than your renal failure, to survive dialysis then. Patients on dialysis now tend to be much sicker. They need closer monitoring for the inevitable blood pressure swings. A lot of what you refer to as hemodialysis was actually peritoneal dialysis.


  6. Linda Gorman says:

    The textbook that I am quoting from distinguished between hemodialysis and peritoneal dialysis. Hence the “home hemodialysis helpers” distinction. The author is a physician. A brief bio is at http://www.renalbusiness.com/news/2010/03/dr-christopher-blagg-to-receive-lifetime-achievem.aspx.

    The argument that the patient population has changed is not convincing on its own. If Medicare had treated dialysis locations equally, one would still expect to see healthier ESRD patients doing home hemodialysis. They may be a smaller fraction of the population now that the government pays for all comers but, presumably, they still exist. Some were testing portable machines for daily dialysis according to published reports in 2005.

    The other question is whether blood pressure monitoring for the sickest patients is beyond the scope of a modern “home hemodialysis helper.” If it isn’t, then perhaps it would be a lot better to dialyze very sick people in situ. They wouldn’t have to be moved and or exposed to other people’s infections.