Development of an end-stage renal disease managed care demonstration

At present, end-stage renal disease (ESRD) beneficiaries cannot enroll in health maintenance organizations (HMOs) or social health maintenance organizations (SHMOs), but HMO members who develop ESRD may remain enrolled, and the Health Care Financing Administration (HCFA) pays the HMO a state-specific, but otherwise unadjusted, capitation rate that is 95% of fee-for-service (FFS) costs. Thus, more than 6,000 ESRD beneficiaries were enrolled in HMOs in 1993, when Congress mandated an ESRD SHMO demonstration in which not only Medicare-covered services, but extra benefits were to be provided to Medicare beneficiaries, with the SHMO receiving a capitation rate based on 100% of FFS costs. The demonstration will test (1) the feasibility of year-round open enrollment of ESRD beneficiaries in HMOs; (2) a capitation system based on treatment status--dialysis, transplant, or functioning graft--and adjusted for age and whether diabetes was the cause of renal failure; (3) the effect of the additional benefits; and (4) whether managed care can improve ESRD quality outcomes. HCFA made demonstration awards in September 1996 to Kaiser-Permanente in Southern California; Health Options in Southern Florida; and Phoenix Healthcare in Central Tennessee. The sites are expected to have 1 year of planning and development before beginning the congressionally mandated 3 years of service delivery. There will be an independent evaluation.