The Fiscal Impact of the Medicare Secondary Payer Act for ESRD.

KEY POINTS: The Medicare Secondary Payer Act modestly reduced federal dialysis spending when accounting for the effect on forgone tax revenue. The policy saved money only when private prices were <3.05 times Medicare rates. Medicare assuming primary payer status for all dialysis care would have saved the government $1 billion annually.

BACKGROUND

The Medicare Secondary Payer Act (MSPA) requires that employer group health plans serve as the primary payer for individuals with ESRD for 30 months, with Medicare serving as the secondary payer. After 30 months, Medicare becomes the primary payer. The net fiscal consequences of this policy for the federal government are unknown.

METHODS

We estimated the net federal fiscal effect of the MSPA for patients receiving dialysis and identified the private-to-Medicare spending ratio ( R ) at which the policy breaks even, accounting for the forgone tax revenue associated with tax-deductible private health care spending. We conducted an economic evaluation using published data on spending and utilization for ESRD, private-to-Medicare spending ratios for dialysis, dialysis chain financials, and federal tax parameters. Primary outcomes were expressed per privately insured dialysis patient-year, with a national aggregate calculated from incident ESRD counts.

RESULTS

At current tax rates, the break-even spending ratio was R <3.05. Using central price ratio estimates of R =2.99, the MSPA reduced federal outlays by $2217 per privately insured dialysis patient-year, or $75 million annually, relative to Medicare being the primary payer for dialysis patients without a coordination period. Ignoring the effect of the MSPA on tax revenue overstated the estimated savings from the MSPA by 4500%. Altering the MSPA so Medicare became the primary payer for dialysis treatments while retaining the coordination period for other services for dialysis patients would have increased federal savings to $29,981 per privately insured dialysis patient-year or $1 billion annually.

CONCLUSIONS

Under current prices and tax rates, the MSPA modestly reduced federal spending, while counterfactual policy changes would result in larger savings.