I was a little surprised to learn there were so many problems with dialysis treatment and billing, according to proponents of California’s Proposition 8 on the 2018 ballot. As a health insurance agent I hear of all sorts of complaints about insurance and billing from my clients and other individuals looking for answers. But issues with dialysis treatment have never been mentioned. Proposition 8 purports to fix all the dialysis treatment and billing problems that patients have encountered.
From the Prop 8 fact sheet, there seems to be two issues. First is patient care and the second is billing and profits. The Capital Public Radio story Why Proposition 8 Is One Of The Most Contentious, And Confusing, Ballot Measures In Play discusses the numerous violations and lawsuits against dialysis clinics. There were 577 complaints out of approximately 140,000 Californian’s who receive dialysis on a regular basis. One complaint is too many when it comes to any health care service, but the volume of complaints does not indicate a systemic failure of treatment at dialysis clinics.
Will Prop 8 Fix Dialysis Clinic Problems?
One of the major supporters of Prop 8 is the California Labor Federation. Their argument is that under Prop 8 it will push clinics to hire more dialysis staff under the revenue formula of the proposition. They contend that if the dialysis company’s revenue is limited to 15% over the cost of care, they will be forced to hire more staff or repay the difference to the insurance company with whom they contract.
Virtually everyone receiving dialysis receives treatment through a health insurance plan. People who suffer from End Stage Renal Disease (ESRD) automatically become eligible for Medicare if they are under 65 years old. Medi-Cal along with private health insurance also covers dialysis treatment. All of these different types of health insurance (public and private) have contracts with dialysis clinics. The contracts specify a negotiated rate for the services. Private insurance usually pays a higher rate for health care services than either Medicare or Medi-Cal.
Health Insurance Dialysis Discrimination
One of the issues the Prop 8 is supposed to address is that some clinics either turn away patients with some types of insurance or create other challenges to receive treatment. This sort of discrimination probably does exist and it needs to be dealt with. We chronically hear about discrimination on the part of doctor’s offices refusing to see potential patients if the individual has a Bronze or Silver plan. The doctor may be in-network for the health plan, but they have chosen to accept only Gold or Platinum plans which limits the patient’s cost-sharing. In short, the doctor is more likely to get paid for his or her services if the health insurance is picking up most of the cost.
For dialysis clinics whose client base is mainly Medicare or Medi-Cal, they will most likely have lower revenues because those two plans have lower reimbursement rates. Hospitals face the same problem. Hospitals need a mix of all the different types of health insurance plans, which each pay different negotiated rates, to make their budgets balance. If there is a shift in patients with lower reimbursing health insurance, they can begin to have budget problems.
Whose Profits Should We Limit? Doctors? Hospitals?
Prop 8 proponents say the dialysis companies are making too much money and their profits need to be limited. Can we not make the same argument about doctors and hospitals? Most of these providers receive an overwhelming percentage of their revenue from health insurance plan reimbursements. Of course, the doctor and hospital lobbies are so strong in Sacramento that legislation to limit their profits is never even considered.
Prop 8 is correct that it is the cost of care, which includes unregulated profit margins, that drives up the cost of health insurance rates. Health insurance companies have tried to negotiate lower rates with providers and sometimes just cut providers who refuse lower reimbursement rates out of their network. Try finding Stanford Hospital and doctors in any individual and family health plans in California. There is only one carrier and that is Health Net PPO and it is really expensive. The fight between Blue Shield of California and Sutter over reimbursements rates is well documented. Blue Shield threatens to drop Sutter from the network, they both go up to the edge, and then they find some middle ground.
Limit Revenue – Limit Supply
The goals of Prop 8 sound good: better patient care and lower costs. Basic economic theory suggests that artificially regulating prices lower leads to shortages. We cannot force the current dialysis clinics to become nonprofit organizations. Just like large retailers close under-performing brick and mortar stores, I would expect no less from the CEO of a dialysis company to close those locations whose primary insurance payer were on the lower end of the reimbursement scale such as Medi-Cal or Medicare.
If those locations that are serving low income individuals close, patients will be forced to travel further to locations that are still open. This means running more people through a facility that might not be able to handle the increased volume. I would hate to see dialysis clinics begin to look like DMV offices with lines out the door and around the block.
If limiting the profits of dialysis companies is a good practice, then it is also good for all the other health care providers like surgery centers, labs, imaging facilities, hospitals, urgent care centers, and medical groups. But this isn’t going to happen. We already know access to care, under the current and really stupid health care delivery system in the U.S., would be severely limited if profit margins were capped. Health care services should not be driven by the return on investment to the investors, but that is the way our system is set up.
At this point, I don’t think singling out one sector of health care services, dialysis, and imposing profit margin restrictions is the right way to address the issues. The real issues of patient care and discrimination need to be addressed by the California Department of Public Health in conjunction with the state legislature. I’m afraid the unintended consequences may be worse than the issues dialysis patients currently face if Prop 8 passes.