ESRD Managed Care Demonstration: Financial Implications

In 1996, CMS launched the end stage renal disease (ESRD) managed care demonstration to study the experience of offering managed care to ESRD patients. This article analyzes the financial impact of the demonstration, which sought to assess its economic impact on the Federal Government, the sites, and the ESRD Medicare beneficiaries. Medicare's costs for demonstration enrollees were greater than they would have been if these enrollees had remained in the fee-for-service (FFS) system. This loss was driven by the lower than average predicted Medicare spending given the demonstration patients' conditions. The sites experienced losses or only modest gains, primarily because they provided a larger benefit package than traditional Medicare coverage, including no patient obligations and other benefits, especially prescription drugs. Patient financial benefits were approximately $9,000 annually.