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Medicare covers dialysis--a process that removes excess fluids and toxins from the bloodstream--for most individuals with end-stage renal disease (ESRD), a condition of permanent kidney failure. The Centers for Medicare & Medicaid Services (CMS) pays for certain dialysis services under a type of bundled rate, called a composite rate, and, for certain dialysis-related drugs, pays a separate rate per dose each time the drug is administered. These drugs are referred to as "separately billable" and are paid at 6 percent above manufacturers' average sales price (ASP). Recently, the Congress required CMS to explore the creation of a bundled payment for all ESRD services, including separately billable drugs. GAO was asked to examine (1) recent changes in payments for ESRD services, (2) the ASP payment method of setting rates for separately billable ESRD drugs, and (3) CMS efforts to develop a bundled payment method that includes all ESRD drugs. GAO obtained information for this study from CMS, the U.S. Renal Data System, ESRD experts, and previously issued GAO reports.

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Matter for Congressional Consideration

Matter Status Comments
In light of the uncertain time frame for CMS's test of bundling and the potential for bundling to eliminate financial incentives to overuse separately billable drugs, the Congress may wish to consider establishing a bundled payment system for all ESRD services as soon as possible.
Closed - Implemented
On July 15, 2008 the Congress overrode a presidential veto to enact legislation requiring the Secretary of the Department of Health and Human Services to implement a bundled payment system, beginning January 1, 2011, making a single payment for Medicare end-stage renal disease items and services.

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