PD Editorial: Everyone pays for dialysis clinics’ pricing scheme

The companies that provide dialysis services in California are using underhanded tactics to make a lot of money, and everyone who pays a health insurance premium is paying the price. Those companies aren't about to stop maximizing profits, so the Legislature must pass Assembly Bill 290 to stop providers from gaming the system.

One of the most complicated things about health care isn't the actual medicine. Don't get us wrong. The medicine is complicated. Doctors don't spend so many years in training for nothing. But few people - doctors or otherwise - train to understand the complexities of insurance reimbursement rates. Master that system, and wealth can be yours.

Fortunately for regular people with regular health insurance premiums, Assemblyman Jim Wood, D-Santa Rosa, understands how the system works, at least when it comes to dialysis. He's the author of AB 290.

Dialysis is a treatment that purifies the blood when someone's kidneys stop working right - often as a result of diabetes. Typically, once people are on dialysis they must visit a treatment center three times per week.

Who pays how much for that treatment is where things get complicated. Here's the simple version.

People with kidney failure usually qualify for federal Medicare insurance that will pay for dialysis. But Medicare pays only a fraction of what private insurance pays for the same treatment. It therefore behooves profit-minded dialysis companies to convince people to stay on private insurance. One way they do that is by funding the American Kidney Fund, which helps low-income dialysis patients pay their private insurance premiums.

The providers - companies like DaVita Inc. and Fresenius Medical Care - spend a little to receive a lot. All insurance policyholders lose because the insurers spread the cost around. Researchers at UCLA found that government pays on average $248 per dialysis session compared with $1,041 paid by private insurers. Who wouldn't want four times as much money for doing the same thing?

All of which brings us to Wood's bill. It would cap payments by private insurers for dialysis at the Medicare rate when the patient has received one of those dialysis industry subsidies. No more stealth subsidies to stay on private insurance just to keep the big checks rolling in.

Woods' bill also addresses a similar system with substance abuse treatment programs.

The dialysis industry's willingness to spend big to fight the cap shows just how much it stands to lose. So far this year, according to a California Healthline report, it has spent $3 million directly and indirectly on media, lobbying and campaign contributions to lawmakers.

The high cost of dialysis isn't the sole driver of rapidly increasing health care costs in California. This one change won't fix everything. That will take many other changes, but the sheer enormity of the challenge should not prevent lawmakers from chipping away where a clear problem has emerged.

Last year, then-Gov. Jerry Brown vetoed a similar bill. This year's version addresses his concerns. The Assembly already has passed it, but it awaits a vote in the Senate and then a signature from Gov. Gavin Newsom. Time is running out on the session.

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