The complex economics of dialysis and insurance, in Freakonomics

 Freakonomics peeks under the rocks to see what crawls out:

Is Dialysis a Test Case of Medicare for All? (Ep. 457)  by Stephen J. Dubner

"But as he dug into their business, he discovered what looked like a suspicious relationship between the two dialysis chains and a charity called the American Kidney Fund, whose mission is to provide financial support to needy patients.

CHANOS: So, the American Kidney Fund will help various patients pay for private policies. 

Private insurance policies, that is, instead of Medicare.

CHANOS: The patient is strongly urged because of quality of care, convenience, whatever the case might be, that they will be treated better as a commercial-policy patient rather than a government-policy patient and that the American Kidney Fund could help them pay those premiums.

On its surface, that does not sound like a terrible thing for a kidney charity to do. But Chanos looked at it from the perspective of the dialysis industry.

CHANOS: If the dialysis companies could push people that would normally be eligible for Medicare into commercial policies, private policies, they could charge those companies often two to four times what the going Medicare reimbursement rate was.

And Chanos believed that pushing people onto commercial insurance is exactly what the American Kidney Fund was doing. It’s helpful here to follow the money.

CHANOS: It will come as probably no shock that the two largest donors to the American Kidney Fund are the two largest dialysis companies, Fresenius and DaVita. 

In 2018, DaVita and Fresenius reportedly donated a combined $247 million to the American Kidney Fund — or about 80 percent of the charity’s revenues.

CHANOS: So, they are basically putting money into the charity. The charity is turning around and using that money to help pay premiums to enroll patients in commercial insurance. And then, the commercial insurers are charged a huge premium to what the dialysis companies are charging the government. 

It’s estimated that for every dollar that DaVita or Fresenius send to the American Kidney Fund, they receive $3.50 in return from private-insurance payments.

CHANOS: And that’s the problem. 

One especially interesting part of this arrangement is who’s losing money: the insurance companies! It’s not often you hear about insurance companies on the losing end — and maybe you don’t have much sympathy.

CHANOS: “Well, it’s the private sector, right? So, why should we care if the insurers make less profits?” Well, the fact of the matter is it’s raising premiums for everybody in the exchanges.

That is, the insurance exchanges, the marketplaces created by the Affordable Care Act, also known as Obamacare.

CHANOS: And the head of California Blue Cross Blue Shield was on the record saying that the dialysis in California was driving up private policy rates dramatically"