Some of the small print on managed care proposals for end-stage renal disease

In this article we discuss selected issues related to Medicare's end-stage renal disease (ESRD) managed care demonstration project and Congressional proposals to remove the barrier to ESRD patients enrolling in Medicare managed care plans. We discuss financial incentives to keep patients healthy; beneficiary obligations under fee-for-service and managed care; risk selection by beneficiaries among plans; and the baseline determination of a capitation rate. The ESRD demonstration offers the opportunity to evaluate the consequences of making Medicare managed care options available to a high cost and clinically vulnerable population. Careful evaluation is necessary to ensure that ESRD managed care options are structured to be beneficial to taxpayers, caregivers, and, most importantly, the beneficiaries choosing these options. Certainly, the potential exists for managed care to benefit patients by changing the fractured system in which each provider only has an incentive to worry about its own costs. However, the possible unintended consequences highlighted in this article strongly suggest that the evaluation of the demonstration project be undertaken before managed care options are made widely available outside the demonstration sites. Problems of a more technical nature, such as how to best use available Health Care Financing Administration data in the rate-setting process, are likely to be overcome, but the time and effort necessary to resolve them should not be underestimated.