The economics of end-stage renal disease

Economics of End-Stage Renal Disease

Health Care Economics

There is a variety of reimbursement mechanisms that exist within the case study entitled the Economics of End Stage Renal Disease. One of the most eminent of these is government remuneration policies, which are virtually unchanged since the early part of the 1970s. The government has assisted in the reimbursement of individuals over the age of 65 who need help with ESRD. In order to do so, and in order to cope with costs that have steadily increased during the last 40 years, it has engaged in a practice known as cost shifting, which is defined as eroding "the payment structure through inflation and continuously revising and delaying the ESRD coverage for patients not previously of Medicare Age" (242). Cost shifting enables the federal government to decrease its expenditures for patients. It also places greater pecuniary responsibilities on commercial health care providers.

The other principal mechanism for reimbursement for services dedicated to End Stage Renal Disease comes from Medicare and Medicaid, the former of which opted to cover people not of traditional Medicare age -- meaning those under the age of 65 -- for treatment related to ERSD. Due to a host of factors that are helping to prolong life and improve the efficaciousness of services for this particular disease, the costs incurred by the Centers for Medicaid and Medicare Services (CMS) have significantly increased since the decision was made in 1972 to cover people under the age of 65 for this condition. Finally, the third major reimbursement mechanism presented in this case study is that offered by commercial health care providers.

All of the aforementioned organizations (the federal government, CMS, and commercial health care providers) have similar economic concerns for offering patients services endemic to ESRD -- in order to balance the issuing of treatment services with the rising expenditures associated with doing so. Again, it should be noted that the costs necessary to treat patients with ESRD have substantially escalated since the 1970s. From an economic standpoint then, these three types of organizations are attempting to issue out treatment while either breaking even, or in the case of commercial health care providers, making a profit. For example, the commercial provider (Fresenius National Medical Care), which performs a significant amount of the United States' dialysis treatment, is often able to favorably negotiate with vendors and payers to assist its profit margins, especially since a large portion of its payment comes from CMS (241). This latter organization, however, is faced with the difficulty of seeing more of its budget consumed by rising ESRD costs while fewer percentages of people afflicted with this condition are actually covered (242). It is attempting to seek an earning before interest, taxes, depreciation and amortization of 15%. Meanwhile, the federal government's official stance of coping with its economic challenges is to continue cost shifting, which is essentially placing the financial burden upon other organizations.

The crux of this case study largely lies in the fact that where once reimbursement was secure and access to treatment was the goal, now reimbursement is the primary issue for ESRD treatment. To that end, patients who opt to pay more are likely to have better access to treatment; meaning, essentially, that patients who choose to go with commercial healthcare providers will have more accessibility and better quality of treatment as opposed to those who depend upon CSM or the government. Patients who go with a commercial healthcare provider such as Fresenius, for example, may be paying considerably more than someone whose costs are financed by CMS or the government. However, that person will certainly be granted treatment (particularly if it involves dialysis), although the expenses will be considerable for medication such as erythropoietin. However, those who opt for CMS or governmental services have to cope with the fact that the former organization is treating fewer and fewer of its population for ESRD, while those relying on the government may well see the effects of cost shifting. Those fortunate enough to in fact receive treatment by these two organizations, however, will be responsible for a substantially lower amount of payment than those who go with commercial healthcare providers.