Transplantation - Medicare's ESRD Program, part 2 - End State Renal Disease - column

Physician Executive, May-June, 1989 by Hugh W. Long, Richard M. Lauve

In Part 1 of this disoussion Long, H. "Medicare's ESRD Program, Part 1: Dialysis." Physician Executive 15(2):24-26, March-April 1989), the focus was on the various forms of dialysis for patients with end stage renal disease (ESRD). In this article, we turn our attention to the alternative therapy-transplantation.

Renal transplantation was included in the original implementing legislation of 1971 as a Medicare benefit. Slightly more than 3,000 transplants were performed in the first fun year of the ESRD program. This number has increased modestly since; 8,967 kidneys were transplanted in 1987 (see table below). An understanding of the reasons for this growth in and potential demand for kidney transplant services is important to the health care executive evaluating new or ongoing participation in the transplant arena.

The development of cadaver kidney harvesting techniques expanded the availability of kidneys for transplantation and increased the percentage of successful kidney transplants utilizing a cadaver donor from 56 percent in 1967 to 79 percent in 1987.1 Part of the success was due to the FDA approval in 1983 of cyclosporin as an immunosuppressive and antirejection drug. The cadaver donor program had been declared the nonevent of the ESRD program" as early as 1980 because of the poor success rate in preventing or rejection.2 The ability to suppress organ rejection with cyclosporin effectively provided a new supply of input resources (kidneys) into the system, a supply heretofore constrained by the need for, but the scarcity of, closely matched related donors. Indeed, during the first three years after FDA approval of cyclosporin, the average annual increase in cadaver kidney use tripled over the prior three years. Much of this increase, however, was absorbed in substitution for living donor matches.

Medicare's inclusion of cyclosporin drug therapy as a benefit began in 1986 and marked a major shift in the ESRD program toward transplantation,. The inclusion of immunosuppression after-care made all ESRD beneficiaries potential recipients of kidney transplants. As a result, recipients of kidney transplants are the fastest growing component of the ESRD program, more than doubling between 1979 and 1987 (see table below).

Medicare policy has consistently supported organ procurement and transplantation as an option in the care of ESRD patients. The ESRD program amendments of 1978 increased benefit eligibility from one to three years after tranplant and increased payments for acquiring kidneys. In 1987, new federal regulations required hospitals funded by Medicare and Medicaid to develop organ transplant policies and to affiliate with organ procurement agencies. The rules were aimed at decreasing national competition for organs. In March 1989, Medicare extended its effort to increase organ availability to Medicare patients by prohibiting the payment of kidney procurement costs when kidney recipients are not Medicare beneficiaries.

The preference for transplants by Medicare is probably based on past difficulties in controlling dialysis center costs and on the improved medical outcomes at lower costs in the tranplantation program. As noted in Part 1 of this article, the renal dialysis program has become more efficient with respect to the annual cost of caring for dialysis patients (in terms of 1972 dollars, a reduction from $13,672/ year in 1974 to $5,700/year in 1987). The medical success of the program has, however, placed increasing political pressure on the Medicare system because (1) increased longevity of ESRD patients (all patients died before dialysis availability; now about 20 percent of those on dialysis die annually) has increased lifetime costs per enrollee, and (2) poorer than expected return-to-work rates of dialysis cost issues. Costs have also increased because Medicare extends all its benefits to ESRD program participants, so that all NON-ESRD care received by these patients also becomes the responsibility of the Medicare system.

Studies of the financial effects of transplantation have demonstrated the cost of maintaining a patient with a functioning graft to be only one-third that of the dialysis patient.3 Even with a 50,000 transplant cost (including organ procurement, hospitalization, and physicians'fees), the present value of the costs to all payers for a patient receiving a transplant now is anticipated to be less than two-thirds that of maintaining the patient on dialysis, assuming the patient would live 10 more years under either approach (see figure 1 above).

Medicare terminates its responsibility to ESRD program enrollees 36 months following their receipt of a transplant. Consequently, Medicare would expect to save almost 60 percent of the present value of its costs for dialysis over a 10-year survival horizon by using transplantation (see figure 2 above).

Doubt concerning the medical success of dialysis was raised as early as 1981. The work of Gutman and others revealed that only 25 percent of dialysis patients worked outside the home, and 60 percent of the patients not having diabetes could do little more than care for their own basic needs.4 Evans et al reviewed a dialysis population in 1985 and showed a drop in labor force participation from 67.1 percent before chronic renal failure to 33.5 percent after the onset of chronic renal failure.5 A similar study in Australia supports the premise that quality of life measures tend to decline through time for patients on chronic dialysis.6 These figures are in stark contrast to the successful transplantation patient, who usually returns to a normal life.5