The end of 2009 proved to be extremely busy for the kidney-care community as it focused its attention on policy initiatives proposed by both the Centers for Medicare and Medicaid Services (CMS) and Congress. Last fall, CMS released the long-awaited end-stage renal disease (ESRD) Medicare prospective payment system (PPS) proposed rule on September 15. Initially, CMS called for a 60-day comment period, but then extended it to 90 days. Many in the kidney-care community spent the following three months drafting comments to CMS outlining their concerns with the proposed bundled payment system or, in a few instances, praising CMS for its positions. The full impact of the bundled PPS is still unknown and many comment letters urged CMS to release an interim final rule that would allow the community to further comment on any changes made in the proposed regulation. While CMS has not announced a decision on the requests for the issuance of an interim rule, the agency has said that it will issue the final rule in 2010, since the bundled payment system will replace the current payment system on January 1, 2011. In early November, the kidney-care community had to shift some of its focus from CMS to Congress as the House concluded consideration of its healthcare reform bill. The House approved H.R. 3962, the Affordable Health Care for America Act, by a vote of 220-215. Thirty-nine Democrats voted against the bill and only one Republican, Anh “Joseph” Cao (R-Louisiana) voted for it. The full impact of the proposed bundled payment system is still unknown. Provisions related to the bundled PPS are also included in the House legislation. The bill requires that all oral drugs, including phosphate binders and calcimimetics, be included in the expanded ESRD bundled payment system. Additionally, the bill modifies the phase-in period of the bundle, allowing facilities to opt into the bundle, rather than opt out, in 2011, 2012, or 2013. The last action of 2009 was the Senate's approval of its healthcare reform bill, H.R. 3590, the Patient Protection and Affordable Care Act. The Senate passed the bill on December 24 by a vote of 60-39. The Senate bill also includes ESRD-related provisions; however, they are different from those in the House-passed bill. The Senate bill eliminates the 1%-reduction to the ESRD market basket and replaces it with a productivity adjustment. The bill also requires a Government Accountability Office (GAO) study and report on Medicare beneficiary access to high-quality dialysis services. The study includes analysis of a provider's ability to furnish specified oral drugs, defined as a drug or biologic for which there is no injectable equivalent, or to arrange for the provision of oral drugs and a provider's ability to comply with State laws in order to furnish specified oral drugs. The study also evaluates whether appropriate quality measures exist to protect beneficiary access to specified oral drugs and other areas to be determined by the Comptroller General. The GAO report is required no later than one year after enactment of healthcare reform legislation. The bill that goes to the President to be signed into law in all likelihood will have ESRD provisions. While no decisions have been made, it is possible that the final legislation will include both the House and Senate ESRD provisions. Or, the final bill could include just the House-passed or Senate-approved provisions. The House and Senate will not hold formal conference negotiations to settle the differences between the two bills which, in addition to the ESRD provisions, include the structure of the Health Insurance Exchange, the inclusion of a public option in the Exchange, the extent of abortion coverage, and the financing of healthcare reform, among other issues. Instead, the House may pass the Senate-approved bill and make further changes to the bill through the reconciliation process. The reconciliation process would allow the Senate to approve potential changes with only 51 votes, and it cannot be filibustered. Following passage of the changes through the reconciliation process, the House would pass the Senate-passed health reform bill, and both bills would be sent to the President for his signature. The timeline for this process remains unclear, and House and Senate Democratic Leaders are working toward an agreement on the package of changes that would be considered.

After nearly nine months of con-gressional committee hearings, contentious town hall meetings, and a bipartisan summit hosted by the White House, President Obama signed the primary healthcare reform legisla-tion into law on March 23, 2010 and the change package into law on March 30, giving the President a huge victory on his top domestic priority. When Congress returned to Washington, D.C. in January to begin the Second Session of the 111th Congress, many thought the House and Senate were close to a compromise on the content of health-care reform legislation. However, negoti-ations on a final bill were stalled when, on January 19, Republican Scott Brown was elected to the Massachusetts Senate seat vacated by the death of Senator Edward Kennedy. Brown's election effectively took away the Senate Democratic leader-ship's 60th vote in support of healthcare reform legislation. Without the fi libuster-proof 60 votes in the Senate, Democrats would not have been able to overcome the procedural hurdles to passing a fi nal House-Senate compromise bill without Republican votes. As a result, pressure mounted on Speaker Nancy Pelosi (D-Calif.) for the House to take up and pass the Senate-approved healthcare reform bill, the Patient Protection and Affordable Care Act, H.R. 3590. However, Speaker Pelosi and the House Democratic lead-ership did not have the votes needed to pass H.R. 3590 without changes. Thus, the House and Senate Democratic lead-ership began to pursue the budget rec-onciliation process to move healthcare reform legislation through Congress in two pieces. The White House and House and Senate Democratic leadership agreed on a two-step process in which the House would pass the Senate-approved healthcare reform bill and then vote on a pack-age of changes to the bill negotiated by Democrats in both chambers. Under budget reconciliation, the Senate would be able pass the package of changes with a simple majority vote. The provisions do not preclude CMS from including oral drugs without an injectable equivalent in the bundled payment system in 2011. With the Senate's commitment to pass the package of changes, the House approved H.R. 3590 by a vote of 219 to 212 on March 21. President Obama signed the Patient Protection and Affordable Care Act into law on March 23. Subsequent to President Obama signing H.R. 3590 into law, the House approved the reconciliation bill amend-ing H.R. 3590 by a vote of 220 to 211, sending the package of changes to the Senate. The Senate then voted 56 to 43, approving the reconciliation bill. However, before passing the bill, it omitted two provisions in the student loan section that were ruled non-germane by the Parliamentarian. The leg-islation had to be returned to the House for final approval before being sent to President Obama for his signature. The House cast the final vote on health-care reform legislation, 220 to 207, and approved the amended reconciliation bill. President Obama signed the recon-ciliation bill into law on March 30. With the President's signature, the end-stage renal disease (ESRD) provisions in the Senate bill became law. Under the new law, the one percent reduction to the ESRD market basket is eliminated and replaced by a productivity adjustment. The law also requires a Government Accountability Office (GAO) study of including oral drugs in the bundled pay-ment system and a report on Medicare beneficiary access to high-quality dialy-sis services. The study will include analysis of a provider's ability to furnish specified oral drugs, defined as a drug or biologic for which there is no injectable equivalent, or to arrange for the provi-sion of oral drugs and a provider's abil-ity to comply with State laws in order to furnish specifi ed oral drugs. The study will also evaluate wheth-er appropriate quality measures exist to protect beneficiary access to speci-fied oral drugs and other areas to be determined by the Comptroller General. The GAO report is required no later than March 23, 2011, one year from the enactment of healthcare reform. It is important for the kidney-care commu-nity to note that the healthcare reform provisions do not preclude the Centers for Medicare and Medicaid Services (CMS) from including oral drugs with-out an injectable equivalent in the bun-dled payment system in 2011. The final rule on the ESRD pro-spective payment system (PPS) has not been released. It is expected that CMS will issue a final regulation this spring, since the bundled payment system will replace the current payment system on January 1, 2011. The full impact of the bundled PPS on patients and providers is still unknown, and only time will tell if CMS agrees to delay the oral drug provisions until after the completion of the GAO study. The authors are with the Prime Policy Group based in Washington, DC.

On November 4, 2008, Sen. Barack Obama (D-IL) made history by becoming the first African-American elected president, the first sitting senator in 48 years to be elected president, and the first Democratic presidential candidate to receive a majority of the popular vote since Jimmy Carter. He also saw his party solidify their majorities in the House and the Senate, giving Democrats control of government for the first time since 1993. Democrats padded their existing majorities in the House and Senate, but not as much as they had hoped before the elections. Importantly, Democrats will not have a 60-vote filibuster-proof supermajority in the Senate, meaning they will still have to get support from a handful of Senate Republicans on most legislation. The expanded majority will give Democrats additional leverage to sculpt the new president's agenda and pass it through the House and the Senate. President-elect Obama has identified reform of the healthcare system as a priority. Any healthcare system reform will likely contain a solution for the Medicare physician payment fee schedule and possibly include additional changes to the end-stage renal disease (ESRD) program. However, the exploding budget deficit will be a major impediment to the Democratic agenda, especially with the increased number and influence of the conservative Blue Dog Democrats and their emphatic support of the Pay-As-You-Go Rule. This rule requires that if spending is increased or tax revenues are decreased, spending must be cut or revenues must be raised in other areas to ensure that the legislation does not increase the deficit. Any healthcare system reform will likely contain a solution for the Medicare physician payment fee schedule, and possibly include additional changes to the ESRD program. In the House, Democratic Leader- ship and Committee Chairmanships had not been expected to change from the 110th Congress, but Energy and Commerce Chairman John Dingell (D-MI) is being challenged for leadership of the panel by the Democrat next in seniority, Henry Waxman (D-CA). Regardless of the chairmanship contest, the committee roster will change because seven members retired from the House. The retirees include two Democrats, Tom Allen (ME) and Darlene Hooley (OR), and five Republicans, Barbara Cubin (WY), Mike Ferguson (NJ), Vito Fossella (NY), Charles “Chip” Pickering (MS), and Heather Wilson (NM). The most significant committee changes will be on the Ways and Means Committee, where Congressman Jim McCrery (R-LA) retired, leaving open the ranking Republican position. Congressman Wally Herger (R-CA) is the most senior Republican on the panel, but he faces a challenge from Congressman Dave Camp (R-MI), chairman of the Health Subcommittee and an original cosponsor of the Kidney Care Quality and Education Act. House Republican leadership will have four additional openings to fill on the committee as a result of five retirements and two incumbents losing their bids for reelection. There are also changes to the committee's Democratic roster. On November 6, committee member Rahm Emanuel (D-IL) accepted the position of White House chief of staff, adding to the Democratic vacancies left by the retirement of Congressman Michael McNulty's (NY) and the death of Congresswoman Stephanie Tubbs Jones (OH) earlier this year. Additionally, the change in the committee ratios should create four additional openings for Democrats. In the Senate, there likely will be two openings on the Finance Committee resulting from the November elections. Senator John Sununu (R-NH) lost his Senate race. Senator Gordon Smith (R-OR) was also defeated; although there may be a recount that could alter the outcome. With his emphasis on healthcare reform during the campaign, it is expected that Obama and his administration, coupled with strengthened Democratic majorities in the House and Senate, will ensure that healthcare reform will be high on the legislative agenda. However, the kidney-care community will have to wait and see what impact reform will have on the ESRD program.

With no Republican support and significant policy divisions among Democrats, Congress adjourned for the August recess without holding floor votes on healthcare reform in the House or Senate. Consideration of healthcare reform legislation will continue into the fall with the President urging Congress to produce a bill by the end of the year. On July 31, the Energy and Commerce Committee became the last of three House panels to approve H.R. 3200, the “America's Affordable Health Choices Act of 2009.” The Committee approved the bill by a vote of 31–28 after two weeks of negotiations with Committee Chairman Henry Waxman (D-Calif.), House Leadership, and the Blue Dog Coalition, which is a group of 52 fiscally conservation House Democrats. Five Democrats joined the Committee Republicans in voting against the bill. The House Ways and Means and Education and Labor Committees, which also have jurisdiction over healthcare reform legislation, approved their versions of the legislation on July 17. The Ways and Means Committee approved its bill by a vote of 23–18. Three Democrats and all Republicans voted against the proposal. The Education and Labor Committee approved its bill by a vote of 26–22, without any Republican support. In June, the Department of Health and Human Services Office of Inspector General (OIG) ruled that a dialysis chain operator could expand an existing program that provides free oral nutritional supplements to dialysis patients who suffer from malnutrition. Under the ruling, eligible patients would be limited to approximately 156 annual doses (up from the previous limit of 40 doses). The supplements would only be provided to current dialysis patients being treated at the requestor's facilities, and would only be consumed one dose at a time. The provider would not generally promote the program to potential patients and would not claim the cost of the supplements as an expense. Because the supplements are consumed individually, are not palatable and thus are treated by patients as medicinal in nature, the OIG felt that there was a limited risk of diversion of the supplements to people who were not program participants. As a result, the OIG concluded that “in these circumstances, the supplements become an integral part of the clinical care provided to a patient.”—Ralph Levy, Jr. The legislation approved by all three House Committees included end-stage renal disease (ESRD) related provisions, which were slightly revised from those included in the House Tri-Committee Health Care Reform discussion draft. One of the provisions eliminates the 1% reduction in the marketbasket update beginning in 2012. Another extends from 36 months of coverage for immunosuppressive drugs for transplant patients not eligible for Medicare because of their age to the life of the transplant. The bill contained provisions to incorporate all oral drugs, including phosphate binders and calcimimetics, into the expanded ESRD bundled payment system and to modify the phase-in period of the bundle, allowing facilities to opt into, rather than opt out, of the bundle in 2011, 2012, or 2013. There were provisions in the discussion draft that were removed from the “America's Affordable Health Choices Act of 2009” before it was considered by the committees, including the productivity adjustment in the ESRD marketbasket update and allowing ESRD patients younger than 65 who are covered by Medicare to purchase Medigap insurance. A provision requiring dialysis facilities to provide information on ownership or compensation arrangements between a facility and the medical director of the facility and any physician to the Department of Health and Human Services (HHS) Inspector General for the purpose of evaluating or auditing payments was modified and the HHS Secretary was substituted for the Inspector General. The revised bill also contained new provisions, including the expansion of telehealth benefits to ESRD beneficiaries who receive care at dialysis facilities and the modification of accountable care organization language to ensure that providers of servicers and supplies can be part of ACOs. Over the August recess, House Leadership and the Rules Committee combined the Committee-approved bills, which vary slightly, into one piece of legislation that will likely be considered on the floor this fall. In the Senate, only the Health, Education, Labor, and Pensions (HELP) Committee approved a healthcare reform bill before the August recess. At presstime, the Finance Committee is expected to release its proposal and begin its markup this fall. The HELP Committee bill did not include any ESRD-specific provisions, and it is unclear whether ESRD provisions will be included in the Finance Committee healthcare reform legislation. While healthcare reform will continue to dominate the attention of Congress throughout the fall, the kidney-care community should pay attention to the Centers for Medicare and Medicaid Services and the regulations implementing the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). Both healthcare-reform legislation and regulations implementing MIPPA could have a profound impact on ESRD patients and providers.

Congress set an ambitious summer schedule and has taken little time to relax. The summer calendar is being consumed by the consideration of healthcare reform legislation, which President Obama and the leadership of the House and Senate have made clear is a top priority for 2009. The Senate Health, Education, Labor, and Pensions (HELP) Committee was the first panel with jurisdiction over healthcare reform to unveil its legislation, the “Affordable Health Choices Act,” and begin the mark-up process. The HELP Committee bill would increase regulations on the private insurance market and would prevent insurance companies from denying coverage because of health status or pre-existing conditions. The legislation would also extend Medicaid benefits to all Americans up to 150% of the federal poverty level (FPL) and would create state-based exchanges called “Affordable Health Benefit Gateways,” offering sliding-scale subsidies in the form of credits to people up to 500% of FPL. In July, the HELP Committee legislation was amended by the addition of two provisions. The first included a public plan, titled the Community Health Insurance Option, which would be administered by the Department of Health and Humans Services (HHS) and would compete with commercial insurance offerings. The second provision included an employer mandate that would require firms with more than 25 employees that do not provide insurance to pay an annual fee of $750 per full-time employee and $375 per part-time employee. The HELP Committee bill, which did not include any end-stage renal disease (ESRD)-specific provisions, will be combined with the Senate Finance Committee proposal on the Senate floor, most likely in September. The House's Health Care Reform discussion draft extends coverage for immunosuppressive drugs for transplant patients from the current 36 months to the life of the transplant. The House Education & Labor, Energy & Commerce, and Ways & Means Committees were the next to take action with the release of the “Tri-Committee” Health Care Reform discussion draft, which did include ESRD-related provisions. The Tri-Committee discussion draft would eliminate the 1% reduction in the market-basket update beginning in 2012 and incorporate a “productivity factor.” The discussion draft would incorporate all oral drugs into the expanded ESRD bundled-payment system, including phosphate binders and calcimimetics. It would also alter the phase-in period of the bundled payment system. Under current law, facilities are required to choose to opt out of the phase-in period in a one-time election. The draft would provide more flexibility by allowing facilities to opt into the bundle in 2011, 2012, or 2013. Under the Tri-Committee discussion draft, dialysis facilities would be required to provide information on the ownership or compensation arrangement between a facility and the medical director of the facility and any physician to the HHS Inspector General, upon request, for the purpose of evaluating or auditing payments. Finally, for transplant patients not eligible for Medicare because of their age, the discussion draft extends coverage for immunosuppressive drugs from the current 36 months to the life of the transplant. Like the HELP Committee legislation, the Tri-Committee discussion draft included provisions to increase regulation on the private-insurance market to prevent companies from denying coverage. It would also expand coverage through the creation of a public plan option and employer mandate. Employers would be given the option of providing coverage or pay a “fee based on 8% of their payroll.” The discussion draft would also expand Medicaid benefits, however to a lesser extent than proposed by the HELP Committee, to individuals and families with incomes below 133 percent of the FPL. The House committees with jurisdiction began marking up the final Tri-Committee bill in July, with the goal of being on the House floor before the August recess. Summer was dominated by the consideration of healthcare reform legislation and the fall will likely follow the trend. President Obama has said he wants a healthcare reform bill on his desk in October. Only time will tell if Congress can meet his deadline. Although healthcare reform took center stage over the summer, the Centers for Medicare and Medicaid Services began working on the implementation of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). The proposed rule is expected to be released in late summer or early fall and the kidney-care community will have to wait until then to learn the full impact of MIPPA.

During his campaign, President Barack Obama said that reform of the healthcare system would be a priority of his administration. After his election, he wasted little time laying the foundation for reform by nominating former Senate Majority Leader Tom Daschle for Secretary of the Department of Health and Human Services and announcing that the former majority leader will lead the administration's effort to gain congressional approval of reform legislation. However, when his nomination became extremely controversial after disclosing his underpayment of taxes, Sen. Daschle asked the President to withdraw his nomination for Secretary. In his place, President Obama nominated Kansas governor Kathleen Sebelius for the position. As a Democrat governor in a predominantly Republican state, Sebelius is expected to help facilitate bipartisan healthcare reform. In addition, President Obama named Jeanne Lambrew as deputy director of the newly created White House Office of Health Reform. Lambrew served as a senior fellow at the Center for American Progress, a program associate director for health at the Office of Management and Budget, and as a senior health analyst at the National Economic Council. Congress is also preparing for discussions on healthcare reform. Senate Health, Education, Labor and Pensions Committee chairman Ted Kennedy (D-Mass.) announced the committee members who will lead three working groups targeting specific aspects of the healthcare system in drafting overhaul legislation. Jeff Bingaman (D-N.M.) was named to head the insurance coverage working group, Tom Harkin (D-Iowa) leads the task force on prevention and public health, and Barbara Mikulski (D-Mass.) heads the task force on quality of care. Medicare reform will also be a priority. It is expected that the legislation will include a “fix” of the Medicare physician payment fee schedule and may include end-stage renal disease provisions. In preparation for the 111th Congress, the Senate and House leaderships have finalized the membership of committees with jurisdiction over healthcare. On the Senate Finance Committee, as a result of Gordon Smith and John Sununu losing their re-election bids, there were two Republican openings. Senators Mike Enzi (R-Wyo.) and John Cornyn (R-Texas) replaced them. There were three new Democratic committee members as a result of Sen. Ken Salazar's (D-Colo.) nomination and confirmation as Secretary of the Department of Interior and the strengthened Democratic majority in the Senate. The new Democratic members are Bill Nelson (D-Fla.), Robert Menendez (D-N.J.) and Thomas Carper (D-Del.). There were also openings on the Senate Health, Education, Labor and Pensions Committee. The retirement of Wayne Allard (R-Colo.) created a Republican opening, which was filled by Senator John McCain (R-Ariz.). There were three Democratic openings. President Obama and Sen. Hillary Clinton (D-N.Y.), appointed and confirmed as Secretary of State, needed to be replaced and, with their increased majority, one Democratic seat was added to the panel. The new Democratic committee members are Bernard Sanders (D-Vt.), Robert Casey (D-Pa.), Kay Hagan (D-N.C.) and Jeff Merkley (D-Ore.). In early December, House Speaker Nancy Pelosi (D-Calif.) announced new Democratic members of the House Ways and Means and Energy and Commerce Committees. The Republican leadership announced that Congressman Dave Camp (R-Mich.), sponsor of the Kidney Care Quality and Education Act, will become ranking member of the Ways and Means Committee. In addition to healthcare reform, Medicare will also be a priority, and legislation is likely to be considered toward the end of the year as a freestanding bill or as part of healthcare reform legislation. It is expected that the legislation will include a “fix” of the Medicare physician payment fee schedule and may include end-stage renal disease provisions. Congress took its first step to address the challenges facing the health system when it passed the Children's Health Insurance Program Reauthorization Act of 2009. The bill was signed into law by President Obama on February 4. Healthcare is going to be a dominant issue in the 111th Congress, and it is certainly possible that by the time the Senate and House conclude this Congress, major reform of Medicare and our healthcare system will be a reality.

While healthcare reform takes center stage and dominates congressional activity, the Centers for Medicare and Medicaid Services (CMS) has released the end-stage renal disease (ESRD) Medicare prospective payment system (PPS) proposed rule, which was required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). The long-awaited proposed bundled payment system, unveiled on September 15, will replace the current payment system beginning January 1, 2011. According to the proposed rule, all items and services currently included in the composite rate would be included in the bundled payment system. Erythropoiesis-stimulating agents (ESAs) in oral and injectable form and all ESRD-related drugs and biologicals that had been separately payable under Medicare Part B and Part D regardless of route of administration, would also be included in the bundled payment system. All laboratory tests, including those ordered by a physician who receives monthly capitation payments for treating ESRD patients that are separately billed by independent laboratories, would also be included in the bundle. The proposed rule excludes vaccines from the bundled payment rate. In the proposed rule, CMS determined that the unit of payment continue to be per treatment, saying that facilities would be paid for up to three treatments per week, unless medical necessity justified more than three treatments. CMS proposes to include payment for all home dialysis services in the bundled system, including home support services. CMS proposed continuing to use age, body surface area, body mass index, and pediatric status as adjustors under the bundled payment system and proposed additional case-mix adjustments for patient sex and 11 comorbidities. The agency also suggested a “new patient adjustment” that would recognize patients that have higher costs in their first four months of maintenance dialysis. The proposed rule did not include an adjustment for patient race or ethnicity. The proposed rule also included a payment adjustment for low-volume facilities, which are defined as a facility that furnishes less than 3,000 treatments in each of the three years preceding the payment year and has not opened, closed, or received a new provider number due to a change in ownership during the three years preceding the payment year. CMS proposed a 20.2 percent increase to the base rate for facilities that are considered to be low-volume. As required by statute, CMS would allow facilities to elect to phase into the new bundled payment system over a four-year period or to be paid entirely under the new payment system beginning on January 1, 2011. In the proposed rule, CMS estimated that 36% of facilities will choose to be excluded from the transition and that 64% will choose to be paid the blended rate during the phase-in period. CMS proposed that a transition budget neutrality adjustment factor of negative 3 percent be applied to all payments during the four-year phase-in period. CMS also proposed to apply a $14.00 per treatment adjustment to the composite rate portion of the bundled payment amount to reflect ESRD-related Part D drugs. The proposed rule also addressed home dialysis (Method I and Method II) and self-dialysis training. CMS proposed to include payment for all home dialysis services, excluding physicians' services, in the bundled payment system. This would include home dialysis supplies, equipment, and home support services. CMS also proposed to discontinue Method II, which would send all reimbursements through a facility, which would then pay the suppliers. In the proposed rule, CMS described the potential components of the Quality Incentive Program (QIP), mandated by MIPPA, but said the agency intends to issue a separate proposed rule to provide the details for QIP. CMS proposed using three existing Dialysis Facility Compare measures focusing on anemia management and hemodialysis adequacy. CMS suggested that the quality reporting period would be all or portions of 2010 because it is required to begin implementing the 2 percent payment reduction on January 1, 2012. When CMS announced the proposed bundled payment rule it requested comments from those in the kidney care community. The agency set a deadline to submit comments of 5:00 p.m. ET on November 16. The agency added that it will issue the final rule in 2010.

The 111th Congress has moved with unprecedented speed in enacting major legislation early in the session. Congress passed the Children's Health Insurance Reauthorization Act (CHIP) in January, the Administration's $789.5 billion “stimulus” legislation in February, and the omnibus appropriations bill for Fiscal Year 2009 in March. Now that these bills have been signed into law, the Administration and Congress are shifting their focus to other priorities, particularly healthcare reform. The Administration highlighted its continuing focus on healthcare when the Office of Management and Budget (OMB) submitted the President's proposed fiscal year 2010 budget “outline” to Congress on February 26, which included a reserve fund of $630 billion over 10 years to finance healthcare reform. According to the budget outline, “constraining costs, expanding access, and improving quality” should be the main objectives of legislation. Underscoring his commitment to reforming the healthcare system, the President hosted a White House Summit, bringing together congressional leadership from both parties, members of the congressional committees with jurisdiction over healthcare reform, stakeholders, and community leaders. At the Summit, President Obama announced a series of four regional health forums, saying, “The time for reform is now and these regional forums are some of the key first steps toward breaking the stalemate we have been stuck in for far too long. The forums will bring together diverse groups of people … and ask them to put forward their best ideas about how we bring down costs and expand coverage.” Systemic reform of the healthcare system could affect coverage, payment, and quality for the kidney community beyond the provisions of last year's Medicare law. Congress is in following the President's lead by declaring its intention to enact major reform legislation this year. In the Senate, Max Baucus (D-MT), chair of the Finance Committee whose panel has jurisdiction over healthcare reform, stressed that it is a top priority for the Senate in 2009. He said that he'd like a healthcare bill ready for Committee consideration by June and for floor action by July. Sen. Baucus outlined his plans for moving forward with the panel's consideration of reform legislation and said that he does not support a single-payer system, but rather a blending of public and private options to expand coverage. He said that the Committee will likely consider “delivery system improvements” in late April, “coverage” in early May, and “cost containment” later that month. Each topic will be the subject of a public roundtable discussion among Finance Committee members and experts. Sen. Baucus is coordinating his activities with Sen. Edward Kennedy (D-MA), chair of the Senate Health, Education, Labor and Pensions Committee, which also has jurisdiction over healthcare reform legislation. In the House, Majority Leader Steny Hoyer (D-MD) and Energy and Commerce Committee Chair Henry Waxman (D-CA) said that they would like to have reform legislation on the floor this summer. Details of the House reform legislation are not yet clear, but like Sen. Baucus, Rep. Waxman has expressed support for building healthcare reform on the employer-based coverage system, Medicare, Medicaid, and CHIP. He said, “There has to be a significant role for both” public and private coverage in any potential overhaul. Other House chairs have expressed support for quickly moving healthcare reform through Congress. House Ways and Means chair Charles Rangel (D-NY) and Education and Labor chair George Miller (D-CA) joined Rep. Waxman in sending President Obama a letter reassuring him that: “As chairs of these Committees and veterans of past health reform debates, we have agreed to coordinate our efforts. … Our intention is to bring similar legislation before our committees and to work from a harmonized approach to ensure success.” For those in the kidney care community, while the main focus of activity will be on the development of regulations implementing the provisions in last year's Medicare Improvements for Patients and Providers Act, healthcare reform legislation could have an impact on providers and patients alike. Some would like to address dialysis-specific issues in any reform package. But, even if they are not included, systemic reform could affect coverage, payment, and quality beyond the provisions of last year's Medicare law. The Obama Administration and Congress have set an ambitious schedule for reform. Only time will tell if the Administration, Senate, and House can work together to achieve comprehensive healthcare reform and how the kidney care community will be impacted.

As a result of the Medicare bill becoming law, attention will now be focused on CMS as they work through the regulation process to implement the provisions of P.L. 110–275. Despite strong congressional support for the Medicare bill, the president kept his word and vetoed H.R. 6331 on the morning of July 15, 2008. Later that day, the House voted 383–41 and the Senate voted 70–26 to override. The new Medicare law, which became effective immediately, negates through the end of the year the 10.6 percent reduction in physician payment rates that went into effect on July 1 (returning the rates to levels that represent the 0.5 percent increase enacted in December 2007) and provides a 1.1 percent boost in 2009. In addition, among its many provisions, the legislation contains electronic-prescribing requirements, physician quality-reporting programs, pay increases for physicians in underserved areas, and a delay of the competitive bidding program for durable medical equipment. The end-stage renal disease (ESRD) provisions in the Medicare law are unchanged from the Medicare bill introduced by Senate Finance Committee chairman Baucus (D-MT) on June 6, 2008. Highlights of the ESRD provisions in the new law are as follows. P.L. 110-275 provides ESRD facilities with a 1 percent increase to the composite rate in 2009 and an additional 1 percent increase in 2010. It also creates a statutory annual update starting in 2012, which would be the market basket minus 1 percent, estimated to be about a 2 percent increase per year. The current hospital differential payment is eliminated. The Medicare law creates a bundled payment system (the bundle) for the treatment of ESRD to take effect on January 1, 2011. The bundle covers items and services included in the composite rate as of December 31, 2010; erythropoiesis-stimulating agents and their oral equivalents; other drugs, biologics, and their oral equivalents; and lab tests and other items and services furnished to individuals for the specific treatment of ESRD. The case-mix adjusters specified in the bill are patient weight, body mass index, comorbidities, length of time on dialysis, age, race and ethnicity. There is also an adjustment for high cost outliers. Low-volume, high-cost facilities will receive a minimum add-on adjustment of 10 percent during the phase-in of the bundle. The Secretary of the Department of Health and Human Services has discretion in determining the “other items and services” that will be included in the bundle, “case-mix” adjusters in addition to those specified in the bill, and the definitions of “outliers” and of low-volume and high-cost facilities that qualify for the add-on adjustment. The bundle will be phased in over four years by the Centers for Medicare and Medicaid Services (CMS) at 25 percent per year. Total expenditures for the ESRD program will be reduced by 2 percent both during the phase-in period and after the bundled payment system is fully implemented. Dialysis facilities will have a one-time option to opt out of the phase-in and be paid under the new bundled system immediately. For those facilities that choose the phase-in, the update will apply to both the composite rate and bundle portion of the reimbursement. Chronic kidney disease (CKD) education provisions are also included in the new law. P.L. 110-275 provides Medicare coverage for a maximum of six education sessions for individuals with stage IV CKD. Rural “providers” of ESRD services will qualify for reimbursement for the education sessions, but facilities will not. The bill establishes CKD demonstration projects in at least three states for five years to increase awareness of, screening for, and surveillance of CKD. The Medicare law also requires that CMS launch a quality program “to combat the risk of under-service and decreased quality that could occur as a result of bundled payments.” Starting January 1, 2012, the bundled payment rate will be reduced by up to 2 percent for facilities that do not achieve or make progress toward specified quality measures. The payment reduction will apply only for the single year. Anemia management, patient satisfaction, iron management, bone mineral metabolism and vascular access are specified as quality measures. According to the Medicare law, quality standards can be met by achievement and improvement, and facility scores will be publicly reported and posted. As a result of the Medicare bill becoming law, attention will now be focused on CMS as they work through the regulation process to implement the provisions of P.L. 110275.

For those who like suspense, intrigue, and uncertainty, the final months of the first session of the 110th Congress can only be described as riveting. For those who prefer an orderly process and foreseeable outcomes, the congressional activities of November and December were maddening. Last November 2007, the Senate Finance Committee began meetings of its members in an effort to reach agreement on a Medicare package that would include changes in the current end-stage renal disease (ESRD) program. These discussions lasted until the Thanksgiving recess and then resumed when Congress returned in early December. With no agreement in sight, Finance Committee chairman Max Baucus (D-Mont.) announced on December 6, 2007, that he was terminating the process of trying to reach committee agreement and that he would begin direct negotiations with the House on what he assumed was the committee position. Based on numerous meetings with senators and staff, the kidney care community believed significant progress was being made as the Senate Finance Committee members discussed the ESRD program with the House. Led by Senator Kent Conrad (D-N.D.), a group of Finance Committee members insisted on improvements in the provisions that passed the House last August. It appeared likely that the Finance Committee package of Medicare reforms would be more equitable to dialysis providers and contain positive provisions concerning chronic kidney disease education, demonstration projects, technician certification, and other sections in the House-passed bill. The Finance Committee package was believed to have contained a bundling provision but with a better reimbursement system. The House-approved bundling provision directed the Centers for Medicare and Medicaid Services to create a bundled payment system for dialysis services at a payment rate of 96% of total estimated payments for all ESRD services as if there were no bundled system. By only delaying for six months the reduction in physician reimbursement, Congress essentially guaranteed that another Medicare bill will be considered this spring. The current ESRD program will again be debated in Congress this year and major reform may be only a few months away. A vote on the Medicare package was to take place later in the day. However, House leaders announced that the Medicare vote would be delayed for two days until a new House package would be added to a bill providing relief from the Alternative Minimum Tax (AMT). But when the morning of December 12 arrived, the Medicare package was no longer a part of the AMT bill. It then appeared that the House would consider its own version of Medicare reform as a freestanding bill and that the measure would be brought to the House floor for a vote on Wednesday, December 13. Then, Wednesday night, the House leadership announced that a vote on the Medicare package would take place the week of December 17, the last week that Congress was in session before recessing for the holidays and for the end of the first session. On December 13 Speaker Nancy Pelosi (D-Calif.) said, “The House will not be originating a Medicare bill.” This left it up the Senate to go first. Where are we now in the legislative process? The ESRD provisions in the House-passed Children's Health and Medicare Protection Act (CHAMP) were not included in the Medicare package that was ultimately approved by the Senate and House and signed into law by the president. Nor did the legislation include an update in the composite rate for this year. What Congress did do was delay the scheduled 10% reduction in physician reimbursement until June 30 of this year and extend a number of other primarily rural-based provisions for the same period. It also reauthorized the Children's Health Insurance Program through March 2009 and provided it with additional funding. By only delaying for six months the reduction in physician reimbursement, Congress essentially guaranteed that another Medicare bill will be considered this spring. Democratic leaders in the House are taking the position that the Medicare package that was passed last summer as part of the CHAMP Act is still pending, leaving it up to the Senate to produce a Medicare bill. The bottom line is that the current ESRD program will again be debated in Congress this year and that major reform may be only a few months away.

Last year came to an anti-climactic end as Congress failed to approve a broad Medicare package. Instead, on December 29, the President signed into law the SCHIP Extension Act, which did not include any end-stage renal disease (ESRD) provisions. This created a temporary fix for the scheduled reduction in Medicare physician payments. The bill also reauthorized SCHIP through March 2009 and included roughly $1.6 billion in additional funding to prevent the projected shortfalls. Early in the second session of the 110th Congress, President Bush submitted his budget proposal for the 2009 fiscal year to Congress. The proposed budget included $200 billion in reductions over five years for Medicare and Medicaid, including a $1 billion reduction in ESRD spending over five years. The $1 billion reduction would be implemented through a bundled payment system. The President's budget also proposed to extend the Medicare Secondary Payer provision for ESRD from 30 to 60 months, but the savings would not kept in the ESRD program. In addition, the proposed budget requested authority for CMS to reinstate the revisit user fee program, which expired at the end of 2007. Reinstatement of user fees would require action by Congress. Other provisions in the budget proposal included a two or three year freeze followed by a permanent 0.65% reduction to the market basket updates for hospitals, skilled nursing facilities, hospice, inpatient rehabilitation facilities, long-term care hospitals, outpatient departments, ambulance services and ambulatory surgical centers. The reductions would generate $117 billion in savings over five years. Congressional democrats have roundly condemned the magnitude of the Medicare cuts in the President's budget, calling the proposal “dead on arrival.” Once again, the renal community faces a very difficult legislative year; members seek to oppose cuts to the ESRD program in an environment fraught with uncertainty. The CHAMP Act remains the House position on Medicare. It is expected to will be the foundation of House conference negotiations with the Senate. The CHAMP Act contained numerous ESRD provisions. It also lowered erythropoiesis stimulating agent payments for large dialysis organizations to average sales price (ASP) + 2%, leaving organizations with fewer than 300 facilities at ASP + 6%. It is unclear at this time whether the Congress will move the Medicare package in a larger budget reconciliation bill. The sources of revenue for the physician fee fix remain problematic, with the administration continuing its opposition to Medicare Advantage cuts. Another factor adding to the legislative complexity this year is a requirement in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) that whenever general revenue funding for Medicare is projected for two consecutive years to exceed 45% of the total expenditures within a seven-year period, the President must submit a proposal to Congress to reduce the general revenue share of Medicare funding to 45% or less. The President's proposal must be given expedited consideration in the House and it is subject to special procedural rules in the Senate. To fill this requirement, the President's budget contains a proposal requiring a four-tenths of a percent reduction in all payments to Medicare providers, including dialysis facilities in FY 2009, which would increase by fourtenths of a percent each fiscal year that the shortfall continues to occur. Increased use of electronic health records, publishing of price and cost information, and “value-based” payments to providers; Medical malpractice reforms, including limiting non-economic and punitive damages; and Income relating the Medicare Part D premium subsidy. The first of these proposals has attracted congressional interest, being similar to proposals long supported by Democratic healthcare leaders. The second two have been called “dead on arrival.” It is unclear at this time what, any, response to the “trigger” will be forthcoming from Congress. Once again, the renal community faces a very difficult legislative year. In addition to gearing up to support an update and an annual update mechanism, dialysis providers and patient groups will be seeking to oppose cuts to the ESRD program in a legislative environment fraught with uncertainty.

On July 9, 2008, the Congressional suspense and intrigue surrounding the Medicare legislation finally approached an end when the Senate approved the motion to proceed to the Medicare Improvements for Patients and Providers Act of 2008, H.R. 6331, by a vote of 69–30 and then passed the bill by voice vote. After the Senate failed to act in June on Senate Finance Committee Chairman Max Baucus's (D-MT) Medicare bill, S. 3101, the House took up a modified version of the legislation. The House overwhelmingly approved H.R. 6331 by a vote of 355–59, which was more than the two-thirds needed to pass the bill under suspension of the rules and enough to override a presidential veto. The bill, which includes many of the provisions in Senator Baucus's bill and a delay of the competitive bidding program for durable medical equipment, has been sent to the president for his signature or veto. The end-stage renal disease (ESRD) provisions in the final bill are unchanged from Chairman Baucus's original Medicare bill. H.R. 6331 negates the 10.6 percent reduction in physician payment rates that went into effect on July 1 by returning the reimbursement to the level before July 1 through the end of the year and providing a 1.1 percent increase in 2009. In addition, among its many provisions, the legislation contains electronic- prescribing requirements, physician quality-reporting programs, and pay increases for physicians in underserved areas. Highlights of the ESRD provisions in the Medicare Improvements for Patients and Providers Act of 2008 are as follows. H.R. 6331 provides ESRD facilities with a 1 percent increase in the composite rate in 2009 and an additional 1 percent increase in 2010. It also creates a statutory annual update starting in 2012, which would be the market basket minus 1 percent, estimated to be about a 2 percent increase per year. The current hospital differential payment is eliminated. H.R. 6331 creates a bundled payment system (the bundle) for the treatment of ESRD to take effect on January 1, 2011. The bundle covers items and services included in the composite rate as of December 31, 2010, erythropoiesis- stimulating agents and their oral equivalents, other drugs, biologics, oral equivalents, lab tests, and other items and services furnished to individuals for the specific treatment of ESRD. The case-mix adjusters specified in the bill are patient weight, body mass index, comorbidities, length of time on dialysis, age, race, ethnicity, and other appropriate factors; and high-cost outliers. Low-volume, high-cost facilities will receive a minimum add-on adjustment of 10 percent during the phase-in of the bundle. The Secretary of the Department of Health and Human Services has discretion in determining “other items and services” that will be included in the bundle, “case-mix” adjusters in addition to those specified in the bill, the definition of “outliers” and of low-volume and high-cost facilities that qualify for the add-on adjustment. The bundle will be phased in over 4 years by the Centers for Medicare and Medicaid Services (CMS) at 25 percent a year. Total expenditures for the ESRD program will be reduced by 2 percent both during the phase-in period and after the bundled payment system is fully implemented. Dialysis facilities will have a one-time option to opt out of the phase-in and be paid under the new bundled system immediately. Chronic kidney disease (CKD) education provisions are also included in the Medicare bill. The bill provides Medicare coverage for a maximum of six education sessions for individuals with stage IV CKD. Rural “providers” of ESRD services will qualify for reimbursement for the education sessions, but facilities will not. The bill establishes CKD demonstration projects in at least three states for 5 years to increase awareness of, screening for, and surveillance of CKD. The bill also requires that CMS launch a quality program “to combat the risk of under-service and decreased quality that could occur as a result of bundled payments.” Starting January 1, 2012, the bundled payment rate will be reduced by up to 2 percent for facilities that do not achieve or make progress toward specified quality measures. The payment reduction will apply only for the single year. Anemia management, patient satisfaction, iron management, bone mineral metabolism, and vascular access are specified as quality measures. According to the bill, quality standards will apply to achievement and improvement, and facility scores will be publicly reported and posted. Despite the overwhelming votes in the House and Senate, White House officials say the president intends to veto H.R. 6331. If he does, the House will vote first on an override, and if successful, then the Senate will. Democrats in both chambers are confident that they have the votes to override a presidential veto.

Now that the Medicare legislation has become law, the center of activity has moved from Congress to the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). The broad language of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) gives the HHS secretary discretion over many of its provisions, including the design and implementation of the bundled payment system of reimbursement for the treatment of end-stage renal disease (ESRD). MIPPA, which became law on July 15, 2008, creates a bundled payment that covers items and services included in the composite rate as of December 31, 2010; erythropoiesis-stimulating agents and their oral equivalents; and laboratory tests. Under the law, the secretary of the HHS has the discretion to include in the “bundle” other drugs, biologics, and their oral equivalents as well as other items and services furnished to individuals for the specific treatment of ESRD. The case-mix adjusters specified in the law are patient weight, body mass index, comorbidities, length of time on dialysis, age, race and ethnicity. However, the law gives the HHS secretary discretion to include additional adjustments, such as those relating to geographic factors and for pediatric and rural facilities. There is also an adjustment for high-cost outliers to be decided by the secretary. MIPPA requires that low-volume, high-cost facilities receive a minimum add-on adjustment of 10 percent during the 4-year phase-in of the bundle. The secretary has discretion in determining the facilities that qualify for the add-on and the amount, if any, over 10 percent. The unit of payment under the bundle is also left to the discretion of the secretary, who may set it on a per-treatment, weekly or monthly basis. Developing the ESRD regulations will be a multiyear process; even though CMS may be starting the process now, the ultimate decisions will be made under a new administration. MIPPA requires CMS to initiate a pay-for-performance program. According to the law, the bundled payment rate will be reduced by up to 2 percent for facilities that do not achieve or make progress toward specified quality measures starting January 1, 2012. Anemia management, patient satisfaction, iron management, bone mineral metabolism, and vascular access are specified in the law as quality measures. The secretary will establish the specific benchmarks used in measuring quality, the design of the overall system, the implementation process, and the details of the public notice requirements. The secretary will also develop the criteria for participation and selection in the five-year chronic kidney disease demonstration project required by MIPPA and the content of the chronic kidney disease education sessions and material that will now be reimbursed by Medicare. MIPPA includes specific language that precludes judicial or administrative review of any of the secretary's decisions. In essence, the secretary and the administration have broad unilateral authority in developing the specific policies for implementing the statutory ESRD requirements. Although the law gives the secretary broad authority in the design of the reimbursement, quality and demonstration programs, CMS will play a crucial role in their development. The implementation decisions will be made through the regulatory process, which begins with CMS. The path for the development of regulations is that the initial decisions are made by CMS, reviewed by the secretary of the HHS, forwarded to the Office of Management and Budget (OMB) for analysis and concurrence, and published as proposed regulations with a public comment period. The comments are reviewed, and changes can be made in the proposed regulations, which must then be reviewed again by the secretary of the HHS and the OMB before being published as final regulations. Once the final regulations are published, there is normally a 60- to 90-day period before implementation. Developing the ESRD regulations will be a multiyear process. Even though CMS may be starting the process now, the ultimate decisions will be made under a new administration. This means that a new secretary of the HHS, administrator of CMS, and director of the OMB, along with other top officials, will have a direct impact on the regulations. The regulatory process is where the action will be focused for the next year.

Congress has not rushed to revisit the Medicare physician fee schedule or to develop another Medicare package since it is not facing another deadline until the end of June. But much has happened regarding ESRD-related policy outside of Congress over the last few months. In February, the Centers for Medicare and Medicaid Services (CMS) released its long-awaited report on bundling, and in March the Medicare Payment Advisory Commission (MedPAC) submitted its annual report to Congress, once again endorsing a bundled payment system. Removing what they assert is the current incentive to over use profitable separately billable drugs; Providing dialysis facilities more flexibility in tailoring treatment to individual patient needs; and Directing additional payment to facilities treating more costly patients. CMS offered two options for the ESRD bundle, although it favored the more limited bundle that would include composite rate services, ESRD-related separately billed injectable drugs, laboratory tests used in furnishing dialysis services not currently in the composite rate, and other dialysis-related services. The report discussed both per-treatment and per-month payment units. It outlined a number of case-mix adjusters that could work for either unit of payment, including age, gender, body surface area, underweight, time on dialysis, and a list of comorbidities. One thing that appears absolutely certain is that whenever Congress acts on ESRD reform, bundling will be the centerpiece of the package. CMS indicated that different types of providers would be affected differently by a system with the characteristics discussed in the report. They concluded that urban facilities, independent facilities, facilities with fewer than 5,000 sessions per year, facilities owned independently or by a regional chain, and facilities that provide a large amount of peritoneal dialysis would see higher payments than they do under the current system. Rural facilities, facilities with 5,000 or more sessions per year, facilities owned by large dialysis organizations, and facilities providing little or no peritoneal dialysis would see lower payments. Even though they acknowledged a negative impact on rural facilities, CMS believes that an adjustment for rural areas may not be warranted. They also expressed agreement with MedPAC s recommendation to remove the payment differential between hospital- based and independent facilities. Reaffirming its past positions on ESRD reform, MedPAC s “March Report to the Congress” once again recommended a bundled payment system, stating “Medicare could better achieve its objectives of providing incentives for controlling costs and promoting access to quality services if all dialysis-related services, including drugs, were bundled under a single payment”. Both the CMS and MedPAC reports support the overall policy direction concerning bundling in the Medicare section of the House-passed Children s Health and Medicare Protection Act (CHAMP). It also appeared that Senate staff was ready to embrace bundling in discussion on Medicare legislation last fall. During a hearing on March 11, Chairman Fortney H. “Pete” Stark (D-Calif.) added further controversy to the debate when MedPAC chairman Glenn Hackbarth testified before the House Ways and Means Health Subcommittee. During the hearing, Stark pointed out that Medicare spends $26,000 a year per ESRD patient and the two large for-profit dialysis chains have Medicare margins of 7.6% while all other providers have Medicare margins of 2.0%. Stark then suggested that since dialysis services are provided by hospitals in most countries, the Medicare margins for dialysis providers should be redirected to hospitals and in return hospitals should have the responsibility of running all in- and outpatient dialysis facilities. He said dialysis is “socialized medicine” and perhaps private chains should be barred from participating in Medicare and outpatient dialysis treatments should be provided by hospitals. According to Stark, the proposal is a “low-hanging fruit”, which could resolve the problems in dialysis care and the issue of underpayment to hospitals. Whether Congress will endorse Stark s proposal, if he chooses to pursue it, is open to debate and tremendous controversy. But one thing that appears absolutely certain is that whenever Congress acts on ESRD reform, bundling will be the centerpiece of the package.

The Food and Drug Administration (FDA), the Centers for Medicare and Medicaid Services (CMS), and Congress continue to examine the use and payment for erythropoiesis stimulating agents (ESAs). A number of actions have been taken, and more are possible this fall. In March, the FDA issued a black-box warning for ESAs (Epogen, Procrit, and Aranesp), stating that the drugs increase the risk of death and serious cardiovascular events in patients with chronic kidney disease when used to achieve hemoglobin levels higher than 12 g/dL. In April, a Journal of the American Medical Association (JAMA) study, “Dialysis Facility Ownership and Epoetin Dosing in Patients Receiving Hemodialysis,” found that for-profit dialysis facilities administer higher and more doses of ESAs to kidney dialysis patients than nonprofit facilities, and the authors of the study speculated that forprofit dialysis facilities administer higher doses of Epogen in part because of the “financial incentives built into the Medicare reimbursement rate.” These events spurred Rep. Pete Stark, House Ways and Means Health Subcommittee chairman, to write multiple letters to all House members, urging them to join him in revising the Medicare payment system “to eliminate financial incentives for overdosing” ESAs. In one letter, Stark said that Medicare's reimbursement payment for Epogen exceeds the cost of the drug and, as a result, for-profit dialysis facilities have a direct financial incentive to over-prescribe it in order to “increase their bottom line.” Stark has said that Congress might address the ESA controversy in the Medicare legislative package, which is expected to move through Congress this fall. “Several news articles have raised concerns not only about Medicare's payment system creating incentives for using higher doses of ESAs than are necessary, but also the impact of marketing and supply contracts between ESA manufacturers and dialysis providers on the utilization of ESAs.” — Sen. Charles Grassley, Senate Finance Committee The FDA has said it will continue to collect data from manufacturers on past and current ESA trials. Its advisory panel on cardiovascular and renal drugs is expected to meet in September to discuss the risks of ESAs in the ESRD setting. Additionally, according to anemia drug manufacturer and Amgen competitor Roche, its ESA drug, Mircera, will receive FDA approval at this fall meeting. The FDA has issued an “approval letter,” meaning Mircera could be approved if certain conditions are met. Shortly after the ODAC urged the FDA to warn physicians and patients that off-label administration of ESAs carries serious cardiac risks, CMS released its decision to limit coverage of ESA treatment for Medicare beneficiaries with certain cancers and related neoplastic conditions. CMS announced that ESA treatment will be considered reasonable and necessary only under specified limited conditions for the treatment of anemia in certain cancers. CMS also said it is continuing to review its monitoring and coverage policies for the use of ESAs in ESRD treatment. It is expected that the debate over ESAs, and possibly the “bundling” of additional items and services in the composite rate, will continue well into the fall at the FDA, CMS and in Congress. Stark is not alone in expressing concerns with the recent studies and the usage and dosing of ESAs. Sen. Charles Grassley, senior republican on the Senate Finance Committee and a major force on Medicare legislation, has also entered the debate, requesting a briefing from the drug manufacturers and directing his staff to thoroughly review the questions that have been raised by several news articles and the actions of the regulatory agencies. For example, in a May 16 letter to a manufacturer Grassley stated, “Several news articles have raised concerns not only about Medicare's payment system creating incentives for using higher doses of ESAs than are necessary, but also the impact of marketing and supply contracts between ESA manufacturers and dialysis providers on the utilization of ESAs.” With Medicare legislation likely to move in the Congress as part of its post-Labor Day agenda, it is very possible that there will be provisions relating to ESAs and reimbursement for dialysis services. Stay tuned.

Congress, the Centers for Medicare and Medicaid Services (CMS), and the Food and Drug Administration (FDA) continue to debate over the use and payment for erythropoiesis stimulating agents (ESAs), and proposals aimed at ESA management are expected to be included in the Medicare legislation scheduled to move through Congress later this fall. In June, the House Ways and Means Health Subcommittee held its long-awaited hearing on safety concerns regarding ESAs, variations in the utilization of ESAs, and Medicare reimbursement issues. The chair, the ranking member, and the witnesses each made statements that reflect the range of views and concerns this issue generates. Rep. Pete Stark (D-Calif.), Subcommittee chairman, said that two major concerns were patient safety and taxpayer dollars. He also said that bundling Medicare payments could encourage more efficient use of ESAs, but that a “one size fits all” approach must be avoided. Rep. Donna M. Christensen (D-Virgin Islands) testified that Congress has an obligation to ensure Medicare beneficiaries with end-stage renal disease (ESRD) receive the best available care. She also expressed her concern over possible disparities in ESRD policy, saying that minority populations might be disproportionately negatively affected. She added that, according to the Kidney Care Partners, African-Americans have a lower response rate to anemia management therapy and often require a higher dose of erythropoietin (EPO). Christensen added that dialysis patients fall along a diverse spectrum of care, so Congress and CMS need to be “cautious and judicious” when they consider bundling separately billable services into the composite rate and when making changes to the existing CMS EPO Monitoring Policy. Congress has an obligation to ensure Medicare beneficiaries with ESRD receive the best available care. According to Leslie Norwalk, acting administrator for CMS, a potential expanded ESRD bundle could include current composite rate services, separately billed drugs, separately billed lab tests, and other separately billed dialysis services paid under Medicare Part B. Norwalk said the bundled payment should have “case-mix adjustments in order to reflect the variation of resources for different kinds of patients” and geographic adjustments “to reflect relative differences in resource costs among geographic areas.” Norwalk also said that CMS believes a prospective bundled payment demonstration is not necessary. She pointed to the fact that, of the six prospective payment systems the agency has implemented, four were done without a pilot or demonstration. She added that CMS would be ready to implement a bundled reimbursement system two to three years after the date legislation is enacted. John Jenkins, director of the FDA Office of New Drugs Center for Drug Evaluation and Research, told the Subcommittee that the FDA is continuing to “carefully and thoroughly evaluate ESAs to make sure their bene- fits outweigh their risks.” In July, the FDA announced that two of their advisory committees will hold a joint meeting in September to consider risks and benefits of ESAs for anemia in chronic renal failure. Bruce Steinwald, healthcare director for the Government Accountability Office, testified that separate billing for Part B drugs that treat ESRD has led to overuse. He recommended to the Subcommittee that the composite rate for ESRD services be restructured to include all drugs and other services that have become routine components of standard dialysis treatment. He added that greater savings may be realized if an episode of care was redefined as a month of dialysis services rather than as a single treatment session. During the hearing, Norwalk also discussed CMS' EPO Monitoring Policy, saying that the agency is planning to double the Medicare payment penalty to 50% when an ESRD patient's hematocrit level remains at 39% or higher for three or more months. Currently payment is cut by 25% unless a physician reports that he or she has reduced the dosage. Norwalk said that the number of patients with hematocrit levels that exceed 39% remains high, and is actually higher than when the EPO monitoring policy was implemented in 2006. On August 1, The Children's Health and Medicare Protection (CHAMP) Act passed in the House. The bill would impact several provisions that relate to Medicare's ESRD program, including reductions in reimbursement rates for EPO and bundling. We'll discuss these developments in next month's Washington Update.

As the 110th Congress, with a new Democratic majority in the House and Senate, begins to develop its agenda, Medicare will again be in the forefront. Major reforms are in store for the dialysis industry, which may have been foreshadowed by the House Ways and Means Committee's December hearing on patient safety and quality issues in the end-stage renal disease (ESRD) program. Currently, the Centers for Medicare and Medicaid Services (CMS) pays dialysis providers for dialysis and associated routine services under the composite rate, a partially bundled rate. For certain dialysis-related drugs, primarily injectables, CMS pays a separate rate for each dose. These drugs are referred to as “separately billable” and are reimbursed at a rate 6% higher than the manufacturers' average sales price. The idea of bundling these drug payments into the composite rate is not new. A 2003 law mandated CMS to conduct a bundling demonstration project and report the results to Congress. Because of the difficulty in establishing a risk adjustment mechanism, the demonstration project has yet to get off the ground. This delay, along with growing questions about epoetin (EPO) pricing and usage in dialysis and related concerns about CMS's EPO monitoring policy (EMP) led Bill Thomas (R-CA), then-Ways and Means chair, to ask the Government Accountability Office (GAO) to examine “recent changes in payments for ESRD services, the average sale price payment method of setting rates for separately billable ESRD drugs, and ... CMS efforts to develop a bundled payment method that includes all ESRD drugs.” It is unclear at this time what, if any, action Congress will take on bundling. It is clear, however, that bundling is a serious option and that dramatic changes to ESRD reimbursement policy might be enacted this year. In December Rep. Thomas held a hearing on patient safety and quality issues in ESRD treatment. Expert witnesses, including authors of recent articles linking higher doses of EPO with adverse cardiovascular effects, stressed the need to comply with FDA label requirements for EPO and supported the GAO bundling recommendation. David Walker, head of the GAO, repeated the report's conclusion that bundling EPO into the composite rate would remove the financial incentives to overprescribe, instead “allowing the flexibility to choose treatments that are clinically effective but may require less use of Epogen.” CMS acting administrator Leslie Norwalk told the committee that providers are urged to follow the FDA label, but that CMS's policy allows for some flexibility in treating patients whose red blood count swings above a hemoglobin level of 12 g/dL. Norwalk says the flexibility is necessary so that providers who follow the guidelines are not unfairly penalized during the 2–6 weeks it takes for elevated hemoglobin levels to correct. She agreed in general with the GAO's recommendation that Congress should consider establishing a bundled payment system for all ESRD services as soon as possible. However, Norwalk explains that CMS delayed implementing the demonstration project because of the difficulty in developing a risk-adjustment policy for the fully bundled rate. She says that a report on fully bundling ESRD payments will be issued by the summer. Rep. Thomas warned that if CMS does not issue this report, Congress may take action to change the way the Medicare program provides payment for antianemia and other separately billable drugs. Both Rep. Thomas and Pete Stark (D-CA), Health Subcommittee chair, accused CMS of reimbursing providers for unapproved high doses of EPO, which is putting patients at risk and costing taxpayers billions of dollars. Thomas agreed that a single payment for bundled dialysis services would avoid creating a financial incentive to treat patients at unapproved doses. At its January meeting, the Medicare Payment Advisory Commission noted the growth in EPO doses and suggested that bundling drug payments may address this concern. It is unclear at this time what, if any, action Congress will take on bundling and what CMS will recommend in its summer report. It is clear, however, that bundling is a serious option and that dramatic changes to ESRD reimbursement policy might be enacted this year. The authors are with BKSH & Associates in Washington, DC.

Tucked away in nearly 500 pages of statutory language in the Children's Health and Medicare Protection Act of 2007 (The CHAMP Act) are provisions that would dramatically alter reimbursement rates for dialysis providers and provide new benefits to patients with chronic kidney disease. House passage of CHAMP in August guarantees that the debate over the End Stage Renal Disease (ESRD) program will continue this year until final congressional action on Medicare legislation. While House Democrats crafted legislation to expand the Children's Health Insurance Program (CHIP) by $50 billion over five years and to include major changes in the Medicare program, the Senate took a narrower approach, and increased funds for CHIP by $35 billion over five years without any Medicare provisions. The House bill drew little Republican support, passing on a near party-line vote of 225–204, while the Senate approved its bill in August by a bipartisan vote of 68–31. The Bush administration has threatened to veto both bills, creating an uncertain path toward enactment. The most far-reaching change to the current program is the section that creates a bundled payment system for dialysis services at a payment rate of 96% of total estimated payments for all ESRD services if there were no bundled system. Among the ESRD provisions in The CHAMP Act, the most far-reaching change to the current program is the section that directs the Centers for Medicare and Medicaid Services (CMS) to create a bundled payment system for dialysis services at a payment rate of 96% of total estimated payments for all ESRD services if there were no bundled system. The bundle, beginning on January 1, 2010, must include commonly used drugs, labs, diagnostic services and home dialysis training, all of which are currently billed separately. The legislation also mandates that case mix adjusters take into account patient weight, length of time on dialysis, age, and ethnicity, and requires a high-cost outlier adjuster payment based on such factors as high use of erythropoiesis stimulating agents (ESAs), geography, pediatrics, and small/low volume and rural providers. The bill allows for a four-year phase-in for certain providers, but the bundle must be fully implemented for services provided on or after January 1, 2013. Payments for the bundled rate will increase annually by the same increase that would have applied to the drug add-on adjustment required under the current law. The bill requires that the Medicare Payment Advisory Commission (MedPAC) report to Congress on the payment adequacy under the ESRD bundled payment system no later than March 1, 2012. In August, legislation was introduced in Congress and referred to committee that, if enacted, would extend coverage for immunosuppressive drugs given to Medicare covered kidney transplant patients. As of the effective date of this proposed legislation, the coverage period for immunosuppressive drugs administered to kidney transplant patients would be extended indefinitely as long as the patient pays the deductibles and co-payments for these drugs as well as all required premiums for Medicare coverage. At present, these items are not covered after thirty-six months from receipt of the transplant. The proposed legislation also prohibits any private group health plan from changing its coverage for these drugs in any plan year beginning on or after January 1, 2008.— Ralph Levy The CHAMP Act also reduces the reimbursement rate to hospital-based facilities so that it equals the payment free-standing facilities receive, effective January 1, 2008. The legislation also lowers ESA payments for large dialysis organizations (LDOs) to average sales price (ASP) plus 2%, leaving any organization with fewer than 300 facilities at the current rate of ASP plus 6%. The provision, which some House members believe addresses possible Medicare overpayments to LDOs, is effective January 1, 2008 and expires upon implementation of the bundled payment system. It does not affect the amount of a drug add-on payment. The bill mandates that MedPAC report to Congress on treatment modalities and make recommendations on payment adequacy for home dialysis. The MedPAC report would include a comparison of current costs and payments between home dialysis and in-center and hospital dialysis, an analysis of Medicare payment adequacy for patient training for home dialysis and recommendations for ensuring appropriate payments, and an evaluation of the incentives and disincentives that influence whether patients receive home dialysis services. CHAMP also proposes an extension of the Medicare Secondary Payer provision from 30 to 42 months and a study and report on ESA dosing guidelines by the Office of the Inspector General. The office would report to Congress no later than January 1, 2009 on guidelines to ensure consistency with the FDA labeling of ESAs, the extent to which physicians sign standing orders for ESAs that are consistent with accepted guidelines and standards, and the role of the medical director and the financial relationship between the medical director and the provider or facility. The House-passed bill also includes provisions from the Kidney Care Quality and Education Act, It establishes a demonstration project on education for CKD patients, requires technician certification and, beginning January 1, 2009, provides Medicare coverage of six education sessions for beneficiaries with stage four CKD. The demonstration project focuses on increasing CKD awareness, screening, surveillance, and research and would be established in at least three states for no longer than five years. None of these provisions are in the Senate bill, creating uncertainty over the timing on final congressional action and the extent of changes in the ESRD program. But the legislative journey, no matter when it ends, will be watched closely by the kidney community which has much to gain-and much to lose-in the outcome.

In 1972, Congress committed to providing patients with end-stage renal disease (ESRD) coverage for their lifesaving therapy through the Medicare program. In 1983 Congress implemented the first Medicare Prospective Payment System (PPS) to reimburse dialysis providers, known as the “composite rate.” In 2007 Medicare's ESRD program continues to be vital in ensuring that patients with kidney failure get access to high-quality lifesaving therapy. But the reimbursement rate for dialysis providers has failed to keep pace with inflation, the cost of medical care, and increases provided to other caregivers. For example, over the past 10 years, the U.S. Consumer Price Index has increased by 28.7%, and hospitals have seen their reimbursement raised by 27.3%, but dialysis providers have only received an increase of 6.8%. Dialysis providers still do not have a statutory mechanism for annually updating their reimbursement rate. In 2006 the Medicare Payment Advisory Commission (MedPAC) estimated that facilities lose $150–$600 for each Medicare patient treated. On February 27 Congress took an important step toward providing dialysis providers with a more equitable reimbursement structure and ESRD patients with better care when the Kidney Care Quality and Education Act of 2007 was introduced in the House and Senate. The legislation, H.R. 1193 and S. 691, is based on the Kidney Care Quality and Improvement Act of 2005, which had 190 cosponsors in the House and 33 in the Senate. The legislation would also provide for a much-needed update to the composite rate for dialysis facilities. Congress has already recognized the value of providing patients with educational programs for chronic diseases such as diabetes. The educational programs for CKD and ESRD patients provided under this bill would offer information about the factors that lead to CKD and ESRD, how to prevent them, and how to avoid kidney failure. They would also allow patients to participate actively in their choice of therapy and to understand how to manage their disease. The three-year Continuous Quality Improvement Initiative established by the bill would ensure that ESRD payments continue to support high-quality care. According to MedPAC, the renal care community is ready to participate in a quality program that rewards providers for their performance. Many in the community agree that it is appropriate for facilities, providers, and physicians to report quality data. Under the bill, quality benchmarks would be based on clinical and quality-of-life measures developed in consultation with the renal care community. Facilities, providers, and physicians would receive quality bonus payments based on attainment of the benchmarks as well as on improvement. To ensure appropriate implementation, the legislation would provide for an update to the composite rate for dialysis facilities under the Continuous Quality Improvement Initiative and base bonus payments on a portion of this update. As a result, the update would be linked to an improved quality system. The legislation would also assist patients by exploring ways to provide them with more treatment options. The percentage of all ESRD patients who rely on home dialysis and other treatment modalities has steadily declined, according to the U.S. Renal Data System. However, home dialysis could improve patient quality of life by allowing them to remain employed and to participate in other activities that promote well-being. The legislation would allow regulators to learn more about the barriers patients face in choosing home dialysis, and find ways to remove them. Ensuring high-quality kidney care, improving the reimbursement system, and expanding kidney disease education programs through the Kidney Care Quality and Education Act of 2007 is necessary because better care for patients means better quality of life, improved rehabilitation, fewer medications, and fewer hospitalizations. The Kidney Care Quality and Education Act will become a focus of congressional attention as the House and Senate begin to examine changes in the Medicare program this year. It is a bill that has widespread support from the renal community and will be its primary legislative initiative. It is the next logical step in improving the ESRD program for patients, practitioners, and providers. The authors are with BKSH & Associates in Washington, DC.