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Extending Medicare Coverage for Preventive and Other Services (2000)

Chapter: Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients

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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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APPENDIX E
Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients

Allen Dobson, Ph.D.,* Joan DaVanzo, Ph.D., and Jesse Kerns, M.P.P.

INTRODUCTION

The Lewin Group was commissioned by the Institute of Medicine (IOM) Committee on Medicare Coverage Extensions to prepare cost estimates for selected expansions of Medicare benefits. Congress, in the Balanced Budget Act of 1997, requested that the IOM examine Medicare coverage for certain preventive and other benefits. The Lewin Group prepared cost estimates for the following services:

  • skin cancer screening,

  • medically necessary dental services (in connection with treatment of specific diagnoses), and

  • elimination of the 3-year limit on immunosuppressive therapy.

The purpose of these cost estimates is to supplement the committee’s analysis of the clinical evidence about the effectiveness of these services. For each topic, we consulted with the committee on specific coverage extension options to be examined.

The following sections summarize our cost estimates for these services, the data sources used for these estimates, and the key assumptions that underlie these estimates. The estimates are based on a series of assumptions, some of which have supporting evidence or data but others of which are best guesses based on committee and consultant judgment in the absence of such information. For each condition or service, the estimates are intended to suggest the order of

*  

Senior Vice President, Senior Manager, and Associate, The Lewin Group.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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magnitude of the costs to Medicare of extending coverage, but they could be considerably higher or lower than what Medicare might actually spend were coverage policies changed. The text and tables in this appendix will allow readers to vary some of the assumptions and calculate alternative estimates.

We followed generic Congressional Budget Office (CBO) estimation practices such as not discounting future costs to present value. Our analytic process required estimations of both gross and net costs to Medicare for the 5-year period 2000–2004. Gross costs are the direct costs to Medicare of the services, and net costs are the gross costs minus the potential cost offsets (e.g., avoided hospitalization costs due to prevented infections) that Medicare would realize as a result of covering these services. Estimates of cost offsets are derived from the committee’s analysis of the available research and expert judgement. We also reduced our cost estimates to account for cost-sharing offsets of 20% and premium offsets of 25% per CBO standards.1 Numbers in the tables may not total exactly due to rounding.

Projections of the Medicare Part B population for the years 2000 through 2004, as well as other sources of Medicare Part A and Part B population statistics (such as race and sex), were provided by the Health Care Financing Administration (HCFA) Office of the Actuary.

The following sections discuss each of these estimates in detail.

SKIN CANCER SCREENING

For each of the coverage extension options considered here, Medicare would cover skin cancer screening for basal cell carcinoma, squamous cell carcinoma, and malignant melanoma. We assume skin cancer screening would be made available to all Medicare Part B beneficiaries.

Gross costs to Medicare of screening are built from estimates of the target population, and estimates of the costs of the services provided. Medicare net costs would be derived by offsetting Medicare savings from gross costs, but none were identified from the literature on skin cancer screening.

The major determinant of cost for Medicare coverage of skin cancer screening is the size of the target population. With more than 39 million enrollees in Medicare Part B, the costs depend on how many Medicare enrollees participate in skin cancer screenings.

We consider gross and net costs of three possible approaches to skin cancer screening:

1  

The Medicare Part B premium offset is set at 25% of Part B expenditures for the elderly Medicare population only. Because most transplant recipients qualify for Medicare based on disability or diagnosis of end-stage renal disease rather than age, premium offsets were not deducted from gross cost estimates for dental care or immunosuppressive therapy for transplant recipients.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
  • Approach 1: Single-step screening is covered for all Medicare Part B beneficiaries.

  • Approach 2: Medicare Part B beneficiaries are identified as “high risk” during a visit to a primary care physician and then screened.

  • Approach 3: Medicare Part B beneficiaries self-select themselves as high risk based on public outreach campaign and go to a dermatologist for screening.

Approaches 2 and 3 both require appraisal of patients as high risk. There are many indicators of high risk for skin cancer, including fair skin, light eyes, history of sunburns or sun exposure, multiple moles on body, and so forth. We assume approximately 10% of the Medicare-aged population fall into the high risk of skin cancer category. This estimate is based on an estimate of the relevant background paper author (Appendix B) and a study referenced in that paper.2

Each estimating approach yields a different volume of biopsies, skin cancer detection, and cost. The 5-year costs of the three approaches and the total biopsy yield are shown in Table E-1.

These cost estimates would be offset by premium increases for Medicare beneficiaries. The CBO uses a 25% reduction in direct costs due to these offsets. The costs of these three approaches taking the premium offset into account are shown in Table E-2.

The methodology of the cost per screen and cost per biopsy and a discussion of additional costs from induced demand for other Medicare services follow in the next section. Later sections discuss the three screening alternatives and the cost estimates for each.

Cost-per-Screen-and-Biopsy Methodology

Some basic cost assumptions underlie our gross cost estimates. All costs are determined for year 2000, then increased at 2% per year. We assume the cost of a screen as an add-on to physician visit is $20. This assumption is based on the average increase of one level in the Medicare non-facility-based reimbursement for a physician visit in 1998, which was $19. The cost of a screen as an independent physician visit is $50. This assumption is based on the weighted average reimbursement for a level 3 visit (one-third from new patient code 99203 and two-thirds from established patient code 99213) in 1998, which was $49. We use data from the Relative Value Unit (RVU) reimbursement rates for 1999 from the Federal Register.3 The 1999 conversion factor was 34.7315. Because the RVU and conversion-factor derived values yield the “Medicare allowed”

2  

MacKie RM, Freudenberger T, Aitchison TC. Personal risk-factor chart for cutaneous melanoma, Lancet 2:487–490, 1989.

3  

Federal Register, Vol. 63, No. 211, November 2, 1998.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-1 Estimated Total Cost (in millions) and Total Number of Biopsies Resulting from Three Approaches to Skin Cancer Screening

 

2000

2001

2002

2003

2004

Total

Total No. of Biopsies

Approach 1

$225.9

$232.6

$239.4

$246.8

$254.8

$1,199.4

1,422,090

Approach 2

96.8

99.4

102.0

104.8

107.8

510.8

1,486,674

Approach 3

37.8

38.8

39.8

40.9

42.1

199.5

660,744

TABLE E-2 Estimated Cost (in millions) with Offset Due to 25% Part B Premium Increases for Three Approaches to Skin Cancer Screening

 

2000

2001

2002

2003

2004

Total

Total No. of Biopsies

Approach 1

$169.4

$174.4

$179.6

$185.1

$191.1

$899.5

1,422,090

Approach 2

72.6

74.5

76.5

78.6

80.8

383.1

1,486,674

Approach 3

28.4

29.1

29.9

30.7

31.6

149.6

660,744

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

charge, which customarily includes a 20% copay from the Medicare enrollee, the Medicare cost per screen is reduced by 20%. Therefore, the add-on cost is reduced to $16 from $20, and the independent visit cost is reduced to $40 from $50. These figures reflect the actual cost to Medicare for these services. The cost of a biopsy is assumed to be $90, a figure supplied by a dermatologist on the committee.

Case-Finding Approach 1: All Medicare Part B Beneficiaries Are Screened

Under this approach, Medicare Part B beneficiaries may be screened during any visit to a primary care physician. We estimate a total 5-year net cost of $1.12 billion for case-finding approach 1, as detailed in Table E-3. The 5-year gross cost estimate is also $1.12 billion because there was no evidence of cost offsets substantiated by the current literature.

Methodology

We assume a majority of Medicare Part B beneficiaries visit a primary care physician each year. Health services research and Medicare data indicate that (1) not all patients will be offered screening due to physician time pressures, lack of familiarity or agreement with recommendations for screening, or other factors; and (2) some beneficiaries will decline screening due to time pressure, modesty, or other factors. Based on information summarized in Chapter 3 of this report, we assume that 30% of Medicare Part B beneficiaries will be screened each year.4

We then assume that those found with suspicious lesions will be referred to a dermatologist for a second screen. We assume 5% of those screened will be referred to and see a dermatologist, and 50% of those referred will receive a biopsy.

Case-Finding Approach 2: Only Those Identified as High Risk Are Screened

Under this approach, Medicare Part B beneficiaries may be identified as high risk during any visit to a primary care physician. We estimate a total 5-year net cost of $510.8 million for case-finding approach 2, as detailed in Table E-4. The 5-year gross cost estimate is also $510.8 million because there was no evidence of cost offsets substantiated by the current literature.

4  

Projections of the annual number of screens are calculated as 30% of total Medicare Part B enrollment projections for 2000–2004 by the HCFA Office of the Actuary.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-3 Estimated Total Cost of Approach 1 to Skin Cancer Screening

 

2000

2001

2002

2003

2004

Total

Annual number of “high-risk” screens

11,153,400

11,259,000

11,363,400

11,485,200

11,622,600

NA

Cost of initial screen

$16

$16

$17

$17

$17

NA

Total cost of initial screens (millions)

$178.5

$183.7

$189.2

$195.0

$201.3

$947.7

Proportion receiving referral

5%

5%

5%

5%

5%

NA

Number receiving referrals

557,670

562,950

568,170

574,260

581,130

2,844,180

Cost per referred screen

$40

$41

$42

$42

$43

NA

Total cost of referred screens (millions)

$22.3

$23

$23.6

$24.4

$25.2

$118.5

Proportion who receive biopsy

50%

50%

50%

50%

50%

NA

Number who receive biopsy

278,835

281,475

284,085

287,130

290,565

1,422,090

Cost per biopsy

$90

$92

$94

$96

$97

NA

Total cost of biopsy (millions)

$25.1

$25.8

$26.6

$27.4

$28.3

$133.3

Total cost, Approach 1 (millions)

$225.9

$232.6

$239.4

$246.8

$254.8

$1,199.4

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-4 Total Cost of Approach 2 to Skin Cancer Screening

 

2000

2001

2002

2003

2004

Total

Annual number of “high-risk” screens

2,933,460

2,952,630

2,970,810

2,992,320

3,017,520

NA

Cost of initial screen

$16

$16

$17

$17

$17

NA

Total cost of initial screens (millions)

$46.9

$48.2

$49.5

$50.8

$52.3

$247.6

Proportion receiving referral

20%

20%

20%

20%

20%

NA

Number receiving referrals

586,692

590,526

594,162

598,464

603,504

2,973,348

Cost per referred screen

$40

$41

$42

$42

$43

NA

Total cost of referred screens (millions)

$23.5

$24.1

$24.7

$25.4

$26.1

$123.8

Proportion who receive biopsy

50%

50%

50%

50%

50%

NA

Number who receive biopsy

293,346

295,263

297,081

299,232

301,752

1,486,674

Cost per biopsy

$90

$92

$94

$96

$97

NA

Total cost of biopsy (millions)

$26.4

$27.1

$27.8

$28.6

$29.4

$139.3

Total cost, Approach 2 (millions)

$96.8

$99.4

$102.0

$104.8

$107.8

$510.8

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Methodology

We assume a majority of the aged Medicare part B population visits a primary care physician each year but that not all physicians will assess patients for skin cancer risk. We assume that 10% of the aged Medicare Part B population will be identified as high risk, be offered screening, and accept it. (Some additional beneficiaries who are at high risk due to past diagnosis of cancerous or precancerous skin lesions will have yearly skin examinations as a part of usual follow-up care.) We then assume that those found with suspicious lesions are referred to a dermatologist for a second screen. We assume 20% of those screened will be referred, and 50% of those referred to a dermatologist will receive a biopsy.

Screening Approach 3: Mass Screening, Beneficiaries at High Risk Self-Select

Under this approach, a public information campaign targets the 10% of the Medicare population who are at high risk for skin cancer for a direct screen by a dermatologist. We estimate a total 5-year net cost of $199.5 million for this mass screening approach, detailed in Table E-5. The 5-year gross cost estimate is also $199.5 million because there was no evidence of cost offsets substantiated by the current literature.

Methodology

We assume that self-identification of risk is reasonably accurate and that 20% of those who identify themselves as at high risk will elect to seek clinical screening. Of the group who elect screening, 20% are assumed to have a biopsy.

Some high-risk individuals already self-identify warning signs of cancer (rather than just a risk factor such as fair skin) and seek physician examination, which Medicare now covers. Also, other individuals with a past diagnosis of a cancerous or precancerous skin lesion will see physicians for examinations as part of covered follow-up care. The assumption for this scenario is that an additional 20% of high-risk people will seek screening who would not have done so in the absence of a new mass screening program. To the extent, however, that a mass screening program brings in those who would have sought an examination anyway, then estimated new costs to Medicare would be lower than presented here.

MEDICALLY NECESSARY DENTAL SERVICES

The cost estimates considered here assume that Medicare would cover certain dental services determined to be medically necessary in connection with treatment of the following specific conditions:

  • cancer of the head or neck,

  • leukemia,

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-5 Estimated Total Cost of Approach 3 to Skin Cancer Screening

 

2000

2001

2002

2003

2004

Total

All Medicare Part B aged population

32,594,000

32,807,000

33,009,000

33,248,000

33,528,000

NA

Proportion “high risk”

10%

10%

10%

10%

10%

NA

Proportion of “high risk” who elect screen

20%

20%

20%

20%

20%

NA

Number screened

651,880

656,140

660,180

664,960

670,560

3,303,720

Cost per screen

$40

$41

$42

$42

$43

NA

Total cost of screens (millions)

$26.1

$26.8

$27.5

$28.2

$29.0

$137.6

Proportion who receive biopsy

20%

20%

20%

20%

20%

NA

Number who receive biopsy

130,376

131,228

132,036

132,992

134,112

660,744

Cost per biopsy

$90

$92

$94

$96

$97

NA

Total cost biopsies (millions)

$11.7

$12.0

$12.4

$12.7

$13.1

$61.9

Total cost, Approach 3 (millions)

$37.8

$38.8

$39.8

$40.9

$42.1

$199.5

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
  • lymphoma,

  • organ transplantation, and

  • congenital or acquired valvular and heart disease.

The basis for selecting the medical conditions listed above is H.R. 1288 (introduced April 1997). Medically necessary dental care is defined in H.R. 1288 “as a direct result of, or will have a direct impact on” treatment of these conditions. The portion of H.R. 1288 that states, “Dental services shall be considered to be cost-effective if furnished in connection with treatment of an individual with…” any of the above four conditions is disregarded because the focus here is on cost estimates not cost-effectiveness.

In our construction of cost estimates for dental services associated with the specified medical conditions, we reviewed previous cost estimates of these benefits developed by the HCFA Office of the Actuary (produced by the Actuarial Research Corporation), the CBO, and the Federation of Special Care Organizations in Dentistry. Our estimates are only for coverage of dental services in the year of the procedure. If services after the intervention are covered by Medicare in years following surgery, radiation, chemotherapy, or other treatment, the cost estimates could be substantially higher.

Total Five-Year Gross and Net Costs for All Conditions

We estimate a total 5-year net cost of $207.7 million for the total dental benefits under consideration, as detailed in Table E-6. The 5-year gross cost estimate is $213.3 million, less a $5.6 million offset from cost savings for one condition. A Medicare premium offset of 25% would reduce the 5-year net costs to $155.8 million. The CBO regularly reduces cost estimates by 25% to account for this premium offset. We determined there was evidence of cost savings of $5.6 million for radiation therapy of the head or neck preventive dental services. There was no other evidence of cost offsets substantiated by the current literature.

Our cost estimate for medically necessary dental services is substantially lower than comparable estimates conducted by the CBO and the HCFA Office of the Actuary. These estimates are the first to estimate the number of Medicare beneficiaries likely to be affected by the policy based on incidence data for each condition. The HCFA Office of the Actuary estimated costs for the five conditions, but it estimated that a fixed percentage of all dental visits of Medicare beneficiaries would be covered under this benefit, essentially a “top-down” approach. In contrast, the cost estimates in this report constitute a “bottom-up” approach, beginning with incidence data for each condition and building the estimate based on these data.

The methodology for our “cost-per-case” estimate, an essential element of each estimate, follows. Subsequent sections discuss the individual cost estimates for each condition and the underlying methodology for each estimate.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-6 Estimated Cost (in millions) of Dental Care for Five Selected Conditions with Offset Due to 25% Part B Premium Increases

 

2000

2001

2002

2003

2004

Total

Radiation therapy for head or neck cancer with savings from prevented ORN

$2.1

$2.3

$2.5

$2.6

$2.8

$12.9

Leukemia

3.7

3.9

4.2

4.4

4.6

20.9

Lymphoma

5.8

6.1

6.4

6.8

7.2

32.3

Organ transplantation

4.1

4.4

4.8

5.2

5.6

24.2

Heart valve repair or replacement

18.4

20.7

23.2

26.0

29.2

117.5

Total net cost for five conditions

32.1

35.2

38.6

42.4

46.6

207.7

Medicare premium offset (25%)

8.0

8.8

9.6

10.6

11.7

51.9

Total net cost less premium offset

24.1

26.4

28.9

31.8

35.0

155.8

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

Cost-per-Visit Methodology

A standardized dental “cost per visit” to Medicare was constructed from the best available data, and is displayed in Table E-7. The Medicare cost per dental visit is built from 1987 (National Medical Expenditure Survey [NMES]) cost-per-case data for the aged population. This value is inflated by the Consumer Price Index for dental services (CPI-U Dental) to 1997, and inflated for 2000–2004 by the average CPI-U Dental increase for 1993–1997 (4.8% annual). The 1987 NMES cost per case is based on the average cost per dental visit adjusted with a 33% increase for greater acuity (similar to an earlier Actuarial Research Corporation adjustment for “medically necessary” dental services). This figure was then adjusted downward to account for a Medicare “discount” and cost sharing. A Medicare Part B copayment of 20% was deducted, and a Medicare discount of 30% is deducted. The Medicare premium offset of 25% is discounted from the estimated total cost for all conditions in the earlier overview section. The yield of the cost per visit is outlined in the following table.

Five-Year Gross and Net Cost Estimate for Dental Care Prior to Radiation Therapy of Head or Neck Cancer

We estimate a 5-year net cost of $12.9 million for dental care prior to radiation therapy for head or neck cancer. The 5-year gross cost estimate for this benefit is $18.6 million.

We have projected potential cost offsets (savings) of $5.6 million over the period 2000–2004. This reduces our 5-year estimate to a net cost of $12.9 million. The results are displayed in Tables E-8 and E-9.

Methodology

Only patients receiving radiation therapy for head and neck cancer were considered. We applied incidence rates for larynx and pharynx cancer, and rates of radiation therapy, for these groups, from the Surveillance, Epidemiology, and End-Results (SEER) database to Medicare Part B population projections. There was a further modification to these incidence rates based on trends in the annual change of incidence rates over time.

  • Larynx cancer: Incidence 45 per 100,000 over 65; 6.5 per 100,000 under 65; 74.2% receive radiation therapy, annual change in incidence rate of −0.4% (source: SEER database).

  • Oral cavity and pharynx cancer: Incidence 19.7 per 100,000 over 65; 3.7 per 100,000 under 65; 49.7% receive radiation therapy, annual change in incidence rate of +0.4% (source: SEER database).

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-7 Estimated Cost per Dental Visit for Years 2000–2004

 

2000

2001

2002

2003

2004

Medicare dental cost per visit

$169

$177

$185

$194

$204

TABLE E-8 Estimated Gross Cost (in millions) of Dental Care for Patients Receiving Radiation Therapy for Head and Neck Cancer

 

2000

2001

2002

2003

2004

Total

Oral cavity and pharynx cancer cases

15,011

15,105

15,197

15,314

15,415

NA

Larynx cancer cases

5,924

6,009

6,094

6,190

6,296

NA

Total number of cases

20,934

21,114

21,291

21,504

21,746

NA

Radiation therapy cases

11,856

11,966

12,075

12,204

12,350

NA

Cost per visit

$169

$177

$185

$194

$204

NA

Cost per patient

$279

$292

$306

$321

$336

NA

Total gross cost (millions)

$3.3

$3.5

$3.7

$3.9

$4.2

$18.6

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

An average of 1.65 dental visits per patient was applied. This includes two visits per patient with teeth (approximately 65% of Medicare population) and one visit per patient without teeth (approximately 35% of Medicare population). This estimate is based on consultation with committee members and relevant background paper authors.

Cost Offsets (Savings) for Radiation Therapy

We have projected potential cost offsets of $5.6 million over the period 2000–2004. This reduces our 5-year estimate to a net cost of $12.9 million. These offsets are derived from evidence in the literature concerning hyperbaric oxygen (HBO) treatment for osteoradionecrosis (ORN). HBO treatment, one procedure available to treat this condition, is very costly, therefore, precluding ORN and HBO treatment can produce substantial cost savings. Data in the background paper suggest that 26.4% of ORN patients receive HBO treatment. ORN occurs in 10.2% of radiation therapy patients, and we estimated (based on Appendix C) that with tooth-preserving services, this rate would be reduced to 2.25%. The reduction in ORN cases would lead to a reduction in HBO treatment cases. Therefore our net cost estimate includes these offsets.

The resultant cost savings and total net costs for these preventive services are shown in Table E-10.

The cost per case of HBO treatment is based on an assumed average cost of $24,000 per patient in 1999 (figure supplied by background paper author). We have reduced the cost to Medicare for HBO treatment by 25% to account for the premium offset and by 20% to account for beneficiary cost sharing. Costs are assumed to increase at 2% per year. Cost savings are derived form the number of avoided ORN cases that would have been treated with HBO.

Five-Year Gross and Net Cost Estimate for Leukemia and Lymphoma Conditions

We estimate a 5-year net cost of $20.9 million for leukemia dental services and $32.3 million for lymphoma dental services. The 5-year gross cost estimates are also $20.9 million and $32.3 million, respectively. There were no cost offsets identified from evidence in the literature review, therefore, our gross cost estimate is equivalent to our net cost estimate, as displayed in Tables E-11 and E-12.

Methodology

Assumptions for gross cost estimate of leukemia and lymphoma dental services are built from incidence rates of leukemia and lymphoma in the aged (65 and over) and nonaged (below 65) populations. Leukemia and lymphoma incidence rates (all derived from the SEER database) are

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-9 Estimated Total Net Cost (in millions) of Dental Care for Patients Receiving Radiation Therapy for Head or Neck Cancer

 

2000

2001

2002

2003

2004

Total

Total gross cost

$3.3

$3.5

$3.7

$3.9

$4.2

$18.6

Cost savings

1.1

1.1

1.1

1.2

1.2

5.6

Total net cost

2.2

2.4

2.6

2.8

3.0

12.9

TABLE E-10 Estimated Savings Resulting from Preventing Services ORN in Patients Receiving Radiation Therapy for Head or Neck Cancer

 

2000

2001

2002

2003

2004

Total

No. of ORN cases without preventive dental services (10.2%)

363

366

370

374

379

1,852

No. of ORN cases with preventive dental services (2.25%)

89

90

91

92

93

454

No. of ORN cases prevented

274

277

279

282

286

1,398

No. of ORN cases that receive HBO (26.4%)

72

73

74

75

75

369

Average cost to Medicare per ORN case

$14,688

$14,982

$15,281

$15,587

$15,899

NA

Total savings from prevented ORN (millions)

$1.1

$1.1

$1.1

$1.2

$1.2

$5.6

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-11 Estimated Total Cost of Dental Services for Leukemia (without premium offset)

 

2000

2001

2002

2003

2004

Total

Leukemia cases

17,019

17,137

17,249

17,382

17,536

NA

Cost per visit

$169

$177

$185

$194

$204

NA

Total cost per patient

$220

$230

$241

$253

$265

NA

Total cost (millions)

$3.7

$3.9

$4.2

$4.4

$4.6

$20.9

TABLE E-12 Estimated Total Costs of Dental Services for Lymphoma (without premium offset)

 

2000

2001

2002

2003

2004

Total

Lymphoma cases

26,323

25,508

26,685

26,893

27,136

NA

Cost per visit

$169

$177

$185

$194

$204

NA

Total cost per patient

$220

$230

$241

$253

$265

NA

Total cost (millions)

$5.8

$6.1

$6.4

$6.8

$7.2

$32.3

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
  • Leukemia—51.4 per 100,000 applied to aged Medicare Part B population, 5.8 per 100,000 applied to disabled Medicare Part B population; and

  • Lymphoma—79.1 per 100,000 applied to aged Medicare Part B population, 11.8 per 100,000 applied to disabled Medicare Part B population.

These incidence rates are applied to the Medicare Part B population projections for the years 2000 through 2004. An average of 1.3 dental visits per patient was then applied. This includes two visits for patients with teeth (approximately 65% of the Medicare population) and no visits per patient without teeth (the remaining 35%). This estimate is based on consultation with committee members and relevant background paper authors.

Five-Year Gross and Net Cost Estimate for Organ Transplantation

We estimate a 5-year net cost of $24.2 million for this dental care benefit. The 5-year gross cost estimate is also $24.2 million. There were no cost offsets identified from evidence in the literature review, therefore, our gross cost estimate is equivalent to our net cost estimate, as displayed in Table E-13.

Methodology

We assume an average of 1.6 dental visits per patient per year, two per patient with teeth (assumed to be 80% of the transplant patients) and none per patient without teeth (the remaining 20%). The source of this estimate is the relevant background paper author. Transplant incidence is assumed to increase at 3.2% per year, the average annual kidney transplant increase from 1993 to 1998.

If Medicare were to cover dental services indefinitely after transplant surgery, this will increase the costs to the Medicare program. If we assume the average number of dental visits posttransplant is two per patient per year, the 5-year gross cost for transplant-related dental care increases to $157.5 million. This estimate would further increase if coverage were retroactive and included current transplant survivors. Likewise, if patients who spend a long time on a waiting list for transplantation have to be reexamined, this will add somewhat to costs.

Five-Year Gross and Net Cost Estimate for Heart Valve Repair and Replacement

We estimate a 5-year net cost of $117.5 million for this dental care benefit. The 5-year gross cost estimate is also $117.5 million. There were no cost offsets identified from evidence in the literature review. Therefore, our gross cost estimate is equivalent to our net cost estimate, as displayed in Table E-14.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-13 Estimated Total Cost of Dental Care for Organ Transplant Recipients

 

2000

2001

2002

2003

2004

Total

Total kidney transplants

13,797

14,239

14,694

15,164

15,650

NA

Total other transplants for >65 population

470

485

501

517

533

NA

Total other transplants for disabled population

940

970

1,001

1,033

1,066

NA

Total transplant incidence

15,207

15,694

16,196

16,714

17,249

NA

Cost per visit

$169

$177

$185

$194

$204

NA

Total cost per patient

$270

$283

$297

$311

$326

NA

Total cost (millions)

$4.1

$4.4

$4.8

$5.2

$5.6

$24.2

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Methodology

The annual number of cases is estimated based on Medicare-covered heart valve diagnosis-related group (DRG)5 discharge volume from 1990 to 1995 projected for the years 2000–2004. Medicare-covered heart valve DRGs increased by approximately 7% annually from 1990 through 1995; this rate of growth is assumed to continue through 2004.

An average of 1.3 dental visits per patient was then applied. This includes two visits for patients with teeth (approximately 65% of the Medicare population) and no visits per patient without teeth (the remaining 35%). This estimate is based on consultation with committee members and relevant background paper authors.

EXTENDED IMMUNOSUPPRESSIVE DRUG COVERAGE

In this section we estimate costs for eliminating Medicare’s current 3-year limit on immunosuppressive drug therapy for kidney, heart, liver, and lung transplant recipients. (Pancreas transplants are not considered separately because they are covered by Medicare only in conjunction with a kidney transplant.) Medicare gross costs are built from estimates of the population with graft survival greater than 3 years and estimates of the costs of the immunosuppressive therapy.

Our analysis considers kidney transplants separately from all other transplants for two reasons:

  1. Kidney transplants represent the substantial majority of covered transplants and associated immunosuppressive therapy.

  2. Kidney transplants have clearly associated cost offsets.

However, extended coverage for immunosuppressive drugs in terms of kidney transplants could apply in at least two ways. First, extended coverage could apply to the two-thirds of transplant recipients who remain Medicare eligible after 3 years (due to either disabled or aged status). Second, extended coverage of immunosuppressive drugs could apply to the entire Medicare transplant population including those kidney transplant recipients who are not classified as either aged or disabled and currently lose all Medicare coverage 3 years following a transplant. Because these two alternatives produce different cost estimates, we have developed estimates of both the costs and the cost savings for each approach.

5  

See Appendix C.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-14 Estimated Total Cost of Dental Care for Heart Valve Surgery Patients

 

2000

2001

2002

2003

2004

Total

Heart valve repair or replacement cases

83,997

89,877

96,169

102,900

110,103

NA

Cost per visit

$169

$177

$185

$194

$204

NA

Total cost per patient

$220

$230

$241

$253

$265

NA

Total cost (millions)

$18.4

$20.7

$23.2

$26.0

$29.2

$117.5

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

We estimate a total 5-year net cost for all organs of $778 million for the extension of immunosuppressive therapy coverage for transplant recipients limited to the “Medicare-eligible” kidney population (Table E-15). We estimate a total 5-year net cost for all organs of $1.06 billion for the extension of immunosuppressive therapy coverage for transplant recipients that includes the “entire” population of Medicare kidney transplants (Table E-16). We determined cost savings of between $550 million to $830 million from coverage of kidney transplant recipients (depending on the extent of extended coverage), primarily due to the avoidance of graft removal and continued dialysis. We found no evidence of cost offsets for other organ transplants substantiated by the current literature and discussions with the committee and consultant who authored Appendix D.

As part of our cost estimate, a Medicare Part B copayment of 20% is deducted from the cost of immunosuppressive drugs. We do not apply a 25% premium offset to the gross costs because Medicare Part B premiums are based on treatment costs for the elderly and only a small proportion of covered tranplants recipients are elderly.

There are several key assumptions that underlie our cost estimates:

  • Key assumption 1: As noted above, the proposed coverage could take the form of either a coverage extension or an entitlement extension. A coverage extension would apply to the two-thirds of transplant recipients who maintain Medicare eligibility after 3 years. Under an entitlement extension, all prior eligible transplant recipients (including those eligible by reason of ESRD status) with graft survival greater than 3 years will be eligible for coverage of immunosuppressive therapy costs. In such a case, if the transplant recipient is not otherwise Medicare eligible by virtue of age or disability status, other Medicare services are not covered under this entitlement. Thus, only costs for immunosuppressive drugs are estimated as new costs from extending coverage for both alternatives. We produce cost (and cost-savings) estimates for extended coverage both for the Medicare-eligible population (either disabled or aged) and for the entire population of Medicare kidney transplant recipients.

  • Key assumption 2: Regardless of the assumptions above, the proposed coverage will be offset somewhat by Medicare Secondary Payer (MSP) provisions. We recognize that the elimination of coverage limits could result in substantial or total “crowd-out” of private insurance coverage (i.e., private insurance will transfer all coverage costs to the Medicare program whenever possible). However, we assume that Congress will extend Medicare’s secondary payer requirements for ESRD beneficiaries from 30 months to indefinitely. We therefore reduce the number of eligible graft recipients by 25% for both the Medicare-eligible estimates and the entire population estimates. According to the United Network for Organ Sharing (UNOS), more than 36% of 3-year-plus kidney transplant recipients are employed full time. If we assume that approximately 75% of this group have employer-sponsored health

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-15 Estimated Total Net Cost (in millions) of Extending Coverage for Immunosuppressants, All Organs (assuming coverage limited to Medicare-eligible kidney transplant population)

 

2000

2001

2002

2003

2004

Total

Gross cost (kidney, limited)

$173.1

$195.5

$220.8

$249.3

$281.6

$1,120.2

Gross cost (other organs)

31.4

36.9

42.6

47.8

53.4

212.1

Total gross (all organs)

204.5

232.3

263.4

297.1

335.0

1,332.3

Cost savings (kidney)

57.2

108.9

116.0

129.0

142.8

553.9

Total net cost (all organs)

147.2

123.4

147.4

168.2

192.2

778.4

TABLE E-16 Estimated Total Net Cost (in millions) of Extending Coverage for Immunosuppressants, All Organs (assuming coverage for “entire” kidney transplant population)

Net Costs

2000

2001

2002

2003

2004

Total

Gross cost (kidney, entire)

$260.9

$293.9

$331.0

$372.8

$419.9

$1,678.0

Gross costs (other organs)

31.4

36.9

42.6

47.8

53.4

212.1

Total gross (all organs)

292.3

330.7

373.6

420.6

473.3

1,890.0

Cost savings (kidney)

86.3

163.9

174.1

193.0

213.1

830.4

Total net cost (all organs)

206.0

166.8

199.5

227.6

260.1

1,060.1

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

insurance,6 we can assume that the resultant 25% will be subject to MSP. We then assume that MSP will affect the Medicare-eligible and total population groups equally. Therefore, we have reduced the populations for both the Medicare-eligible and total population estimates by this 25%. For purposes of this estimate, we assume that Medicare picks up no costs as secondary payer.

  • Key assumption 3: The cost to Medicare of immunosuppressive therapy is assumed to be $5,400 per patient per year in the year 2000, increasing at 4% per year in subsequent years. This cost reflects a 20% Medicare cost-share and a 5% Medicare discount from the “average wholesale price” of the drugs.7 Adjusting back up for these reductions yields a per-patient cost of approximately $7,100 in 2000.8 This figure applies to kidney, heart, liver, and lung transplant recipients. As shown in Appendix D, the range of cost for immunosuppressive therapy in 1999 is between approximately $5,000 and $13,000. If we assume that 75% of beneficiaries receive coverage on the low end of this spectrum, while 25% receive coverage at the high end, this produces a weighted average cost of $7,000 per member per year.9

Additional Discussion: Potential Savings to the Medicaid Program

Savings to the Medicaid program are not specifically included in our cost estimate. However, the government would realize savings from the Medicaid program as a result of this coverage. In 1996, the CBO estimated total savings to the Medicaid program of $6 million per year, for the years 2000 and 2001, for extended coverage for Medicare-eligible transplant patients. The CBO estimate considered the pool of transplant recipients that would still be Medicare eligible 3 years after transplant, whereas our estimate considers both this subgroup and all Medicare-covered transplants. For the Medicare-eligible extension, this would produce 5-year savings to the federal share of the Medicaid program of approximately $32.5 million.10 Current figures suggest that 66% of Medicare-covered transplants who survive beyond 3 years retain Medicare eligibility (i.e., are either disabled or over 65), while 34% are no longer Medicare eligible.11 If we adjust the CBO-calculated Medicaid program savings by a comparable ratio, savings to the Medicaid program in the case of a total population would produce

6  

EBRI issue brief: Sources of Health Insurance and Characteristics of the Uninsured, an analysis of March 1998 Current Population Survey.

7  

As provided in the Balanced Budget Act of 1997.

8  

This estimate of the average cost of immunosuppressive therapy was provided by the HCFA Office of the Actuary and the author of Appendix D.

9  

(0.75×$5,000)+(0.25×$13,000)=$7,000

10  

Assumes immunosuppressive drug costs increase at 4% per year.

11  

Population distribution data courtesy of Dr. Paul Eggers, HCFA.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

5-year savings to the federal share of the Medicaid program of approximately $49 million.12

The following sections detail gross and net costs for both Medicare-eligible kidney transplants and total population kidney transplants and other organ costs.

Kidney Immunosuppressive Gross and Net Cost Estimates

We have produced two cost estimates for kidney immunosuppressive coverage:

  1. Medicare-eligible kidney population: an estimate of costs and savings associated with extended coverage for kidney recipients who retain Medicare eligibility beyond 3 years (approximately two-thirds of this population).

  2. Entire population: an estimate of costs and savings associated with extended coverage for all kidney recipients originally covered by Medicare (under the ESRD program, the entire population that receives a Medicare-covered transplant receives immunosuppressive coverage regardless of other Medicare eligibility status).

Our rationale for producing both estimates is the possibility that extended coverage could apply to either the subset of this population that remains Medicare eligible after 3 years (due to either disabled or aged status) or the entire Medicare transplant population (as the whole ESRD kidney transplant population receives coverage for 3 years).

Total Net Costs of Medicare-Eligible and “Entire” Kidney Transplant Population Coverage Extension

We estimate a total 5-year net cost of $566 million for extending immunosuppressant coverage for the Medicare-eligible kidney transplant population. This estimate incorporates a 5-year gross cost estimate of $1.12 billion, and a 5-year cost savings offset estimate of $554 million, as shown in Table E-17.

We estimate a total 5-year net cost of $848 million for a coverage extension for the “entire” kidney transplant population. This estimate incorporates a 5-year gross cost estimate of $1.68 billion and a 5-year cost savings offset estimate of $830 million, as shown in Table E-18.

12  

This value is produced by the equation [0.66X=$6 million] and solving for X. It assumes Medicaid immunosuppressant costs increase at 4% per year.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-17 Estimated Net Cost (in millions) for Medicare-Eligible Kidney Transplant Population Only

 

2000

2001

2002

2003

2004

Total

Gross cost

$173.1

$195.5

$220.8

$249.3

$281.6

$1,120.2

Cost savings

57.2

108.9

116.0

129.0

142.8

553.9

Net cost

115.8

86.6

104.8

120.4

138.8

566.3

TABLE E-18 Estimated Net Cost (in millions) for “Entire” Kidney Transplant Population

 

2000

2001

2002

2003

2004

Total

Gross cost

$260.9

$293.9

$331.0

$372.8

$419.9

$1,678.4

Cost savings

86.3

163.9

174.1

193.0

213.1

830.4

Net cost

174.6

129.9

156.9

179.8

206.7

848.0

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

The methodology and assumptions that underlie both the gross cost estimates and the cost offset estimates for each level of coverage are discussed below. The cost savings for each coverage scenario differ because the potential savings from avoided graft failure are based on different initial population estimates (i.e., there are more greater-than-3-year grafts in the overall transplant population than in the Medicare-eligible population, therefore, a greater number of failed grafts could be prevented with extended coverage).

Gross and Net Cost Estimates for Medicare-Eligible Kidney Transplant Population

In this section we consider the gross and net costs of extended coverage for the Medicare-eligible kidney transplant population. Gross costs are the annual costs of immunosuppressive therapy for all Medicare-eligible kidney transplant recipients with graft survival greater than 3 years, and net costs are the gross costs less the avoided costs due to this extended coverage. The 5-year gross cost estimate of this coverage is $1.12 billion, as shown in Table E-19.

We estimated potential 5-year cost savings of $553 million attributable to extended immunosuppressive coverage of kidney transplant recipients. These cost savings yield a total estimated 5-year net cost of $566 million as already shown in Table E-17.

Methodology

The numbers of kidney transplant recipients with grafts longer than 3 years, and of the subset of this population that retains Medicare eligibility after 3 years, were supplied by Dr. Paul Eggers, Director, Division of Beneficiaries Research, HCFA. We assume the Medicare-eligible greater-than-3-year kidney graft population will grow at an 8.6% annual rate. This rate is derived from the 3-year average growth rate from 1995 through 1997. This figure is also consistent with historical trends data, increasing patient and graft survival, and the limited pool of donor organs.

This population estimate is then reduced by 25% to account for graft recipients who receive coverage through other insurance (see discussion above).

Cost savings are derived from assumed reductions in:

  • the number of grafts that fail due to noncompliance with drug regimen associated with cost pressure;

  • the resultant costs of surgery to remove failed grafts;

  • the cost of dialysis for these patients; and

  • the cost of retransplantation for those who lose their graft and subsequently receive a new transplant.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-19 Estimated Gross Cost (in millions) of Extended Immunosuppressive Drug Therapy for Medicare-Eligible Kidney Transplant Population

 

2000

2001

2002

2003

2004

Total

Kidney graft patient >3 years, Medicare eligible (less secondary payer)

32,048

34,804

37,797

41,048

44,578

NA

Cost per year of immunotherapy

$5,400

$5,616

$5,841

$6,074

$6,317

NA

Gross cost

$173.1

$195.5

$220.8

$249.3

$281.6

$1,120.2

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

We assume an annual graft failure rate due to cost pressure of 2.5%. This assumption is based on the weighted average failure rate of kidney grafts after 3 years of 7% (cadaveric donor 8%, living donor 5%).13 We then assume that one-third of these failures are due to noncompliance with immunosuppressive therapy due to cost pressure. This figure was agreed upon by the consultant who authored Appendix D and Dr. Eggers, and informed by some cited evidence from “natural” experiments as described in Appendix D.

The “cost-of-loss” measure incorporates all costs in the year of failure, including surgery, treatment, hospitalization, and dialysis costs for that year. The failed-graft population returns to dialysis. The “cost of dialysis” includes all direct medical costs associated with dialysis.

Certain factors remove patients from the failed-graft-returned-to-dialysis pool. Data suggest 12% annual mortality after graft failure, so the failed graft population is reduced by this rate annually. Because approximately 10% of all renal transplants are retransplants, we assume 10% of the failed-graft pool receive new transplants each year. Since the cost of retransplantation would have been avoided if the graft had not failed, the associated costs of retransplantation for these patients are also potential cost savings. The cost-of-loss, dialysis, and retransplantation values were provided by Dr. Eggers, HCFA. The results are displayed in Table E-20.

We estimated potential 5-year cost savings of $553 million attributable to extended immunosuppressive coverage of kidney transplant recipients. These cost savings would offset gross costs.

Gross and Net Costs of “Entire” Population Kidney Transplants

In this section we consider the gross and net costs of extended coverage for the entire kidney transplant population, shown in Table E-21. Gross costs are the annual costs of immunosuppressive therapy for all kidney transplant recipients with graft survival greater than 3 years; net costs are gross costs less the avoided costs due to extending coverage. The 5-year gross cost estimate of this coverage is $1.68 billion.

We estimated potential 5-year cost savings of $830 million attributable to extended immunosuppressive coverage of kidney transplant recipients. These cost savings yield a total estimated 5-year net cost of $848 million, as shown already in Table E-18.

13  

UNOS database.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-20 Estimated Cost (in millions) Due to Loss of Renal Grafts Attributed to Cost Pressure on Beneficiaries, Medicare-Eligible Population Only

 

2000

2001

2002

2003

2004

Total

Graft failure rate from cost pressure

2.5%

2.5%

2.5%

2.5%

2.5%

NA

Annual >3-year failed grafts

801

870

945

1,026

1,114

NA

Prior number of >3-year failed grafts

625

616

675

733

NA

Total >3-year failed grafts

801

1,495

1,561

1,702

1,847

NA

Cost of loss

$61,057

$62,278

$63,523

$64,794

$66,090

NA

Total annual cost of removal (millions)

$48.9

$93.1

$99.2

$110.3

$122.1

$473.5

Per unit cost of dialysis

$53,042

$54,103

$55,185

$56,289

$57,415

NA

Total cost of dialysis (millions)

$68.0

$129.1

$185.7

$239.3

$622.1

Number retransplanted (10% of total)

80

150

156

170

185

NA

Cost per retransplantation

$103,607

$105,679

$107,793

$109,949

$112,148

NA

Total costs of retransplantations (millions)

$8.3

$15.8

$16.8

$18.7

$20.7

$80.4

Total cost due to graft loss

$57.2

$108.9

$116.0

$129.0

$142.8

$553.9

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-21 Estimated Gross Cost of Immunosuppressive Drug Therapy for “Entire” Kidney Transplant Population

 

2000

2001

2002

2003

2004

Total

Kidney graft patient >3 years, total population (less secondary payer)

48,315

52,325

56,668

61,372

66,466

NA

Cost per year of therapy

$5,400

$5,616

$5,841

$6,074

$6,317

NA

Total gross cost (millions)

$260.9

$293.9

$331.0

$372.8

$419.9

$1,678.4

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Methodology

The numbers of kidney transplant recipients with grafts longer than 3 years, and of the subset of this population that retains Medicare eligibility after 3 years, were supplied by Dr. Paul Eggers, Director, Division of Beneficiaries Research, HCFA. We assume the Medicare-eligible greater than 3-year kidney graft population will grow at an 8.6% annual rate. This rate is derived from the 3-year average growth rate from 1995 through 1997. This figure is also consistent with historical trends data, increasing patient and graft survival, and the limited pool of donor organs. This population estimate is then reduced by 25% to account for graft recipients who receive coverage through other insurance (see discussion above).

Cost savings are derived from assumed reductions in:

  • the number of grafts that fail due to noncompliance with drug regimen associated with cost pressure;

  • the resultant costs of surgery to remove failed grafts;

  • the cost of dialysis for these patients; and

  • the cost of retransplantation for those who lose their graft and subsequently receive a new transplant.

We assume an annual graft failure rate due to cost pressure of 2.5%. This assumption is based on the weighted average failure rate of kidney grafts after 3 years of 7% (cadaveric donor 8%, living donor 5%).14 We then assume that one-third of these failures are due to noncompliance with immunosuppressive therapy due to cost pressure. This figure was agreed upon by the consultant who authored Appendix D and Dr. Eggers, and informed by some evidence described in Appendix D.

The cost of loss measure incorporates all costs in the year of failure, including surgery, hospitalization, and dialysis for that year. The failed-graft population returns to dialysis. The cost of dialysis includes all direct medical costs associated with dialysis.

Certain factors remove patients from the failed-graft-returned-to-dialysis pool. Data suggest 12% annual mortality after graft failure, so the failed-graft population is reduced by this rate annually. Because approximately 10% of all renal transplants are retransplants, we assume 10% of the failed graft pool receive new transplants each year. Since the costs of retransplantation would have been avoided if the graft had not failed, the associated cost of retransplantation for these patients are also potential cost savings. The cost-of-loss, dialysis, and retransplantation values were provided by Dr. Eggers, HCFA. We estimated potential 5-year cost savings of $830 million attributable to extended immuno-

14  

UNOS database.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

suppressive coverage of kidney transplant recipients. These cost savings would offset gross costs. The results are displayed in Table E-22.

Heart, Liver, and Lung Gross and Net Cost Estimates

We estimate a total 5-year gross cost of $212 million for the extension of immunosuppressive therapy coverage for heart, liver, and lung transplant recipients. There were no cost offsets, therefore, the 5-year net cost estimate is also $212 million. These costs, displayed in Table E-23, apply to all immunosuppressive therapy for Medicare-eligible heart, liver, and lung transplant recipients with graft survival greater than 3 years.

Methodology

We estimated the number of grafts with greater-than-3-year survival by combining historical Medicare covered transplants (MEDPAR data) and graft survival rates from UNOS. These estimates were determined in conjunction with Dr. Eggers.

We estimated a projected rate of increase for each organ population (heart, liver, and lung), based on historical rates of population growth and transplant trends:

  • heart: estimated to grow at rates from 17% (2001) to 10% (2004),

  • liver: estimated to grow at rates from 20% (2001) to 10% (2004), and

  • lung: estimated to grow at rates from 40% (2001) to 10% (2004).

The only viable cost offset found due to heart, liver, and lung extended coverage is retransplantation, which is an expensive procedure (often costing as much as $300,000, according to the background paper author). However, virtually all retransplants of these organs occur within the first year following the transplant; therefore few cost offsets can be attributed to a greater-than-3-year coverage extension. Also, graft failure due to chronic rejection is low in liver transplant patients, the most common category after kidney transplants.

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-22 Estimated Cost (in millions) Due to Loss of Renal Grafts Attributed to Cost Pressure on Patients, “Entire” Transplant Population

Avoided Costs

2000

2001

2002

2003

2004

Total

Graft failure rate from cost pressure

2.5%

2.5%

2.5%

2.5%

2.5%

NA

Annual >3-year failed grafts

1,208

1,308

1,417

1,534

1,662

NA

Prior number of >3-year failed grafts

942

926

1,012

1,096

NA

Total >3-year failed grafts

1,208

2,250

2,343

2,547

2,757

NA

Cost of loss

$61,057

$62,278

$63,523

$64,794

$66,090

NA

Total annual cost of removal (millions)

$73.7

$140.1

$148.8

$165.0

$182.2

$709.9

Per unit cost of dialysis

$53,042

$54,103

$55,185

$56,289

$57,415

NA

Total cost of dialysis (millions)

$68.0

$129.1

$185.7

$239.3

$622.1

Number retransplanted (10% of total)

121

225

234

255

276

NA

Cost per retransplantation

$103,607

$105,679

$107,793

$109,949

$112,148

NA

Total costs of retransplantations (millions)

$12.5

$23.8

$25.3

$28.0

$30.9

$120.5

Total cost due to graft loss

$86.3

$163.9

$174.1

$193.0

$213.1

$830.4

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×

TABLE E-23 Estimated Gross Cost of Immunosuppressive Therapy for Heart, Liver, and Lung Transplant Patients

 

2000

2001

2002

2003

2004

Total

Annual heart >3 years

1,863

2,179

2,506

2,757

3,032

NA

Annual liver >3 years

1,735

2,082

2,395

2,634

2,897

NA

Annual lung >3 years

217

304

395

474

521

NA

Total graft patient >3 years

5,815

6,566

7,297

7,867

8,455

NA

Cost per year of immunosuppressive therapy

$5,400

$5,616

$5,841

$6,074

$6,317

NA

Gross cost in millions

$31.40

$36.87

$42.62

$47.79

$53.41

$212.1

Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 333
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 334
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 335
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 337
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 338
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 339
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 340
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 341
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 342
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
Page 343
Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
×
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Suggested Citation:"Appendix E: Cost Estimates for Expanded Medicare Benefits: Skin Cancer Screening, Medically Necessary Dental Services, and Immunosuppressive Therapy for Transplant Recipients." Institute of Medicine. 2000. Extending Medicare Coverage for Preventive and Other Services. Washington, DC: The National Academies Press. doi: 10.17226/9740.
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This report, which was developed by an expert committee of the Institute of Medicine, reviews the first three services listed above. It is intended to assist policymakers by providing syntheses of the best evidence available about the effectiveness of these services and by estimating the cost to Medicare of covering them. For each service or condition examined, the committee commissioned a review of the scientific literature that was presented and discussed at a public workshop.

As requested by Congress, this report includes explicit estimates only of costs to Medicare, not costs to beneficiaries, their families, or others. It also does not include cost-effectiveness analyses. That is, the extent of the benefits relative to the costs to Medicare—or to society generally—is not evaluated for the services examined.

The method for estimating Medicare costs follows the generic estimation practices of the Congressional Budget Office (CBO). The objective was to provide Congress with estimates that were based on familiar procedures and could be compared readily with earlier and later CBO estimates. For each condition or service, the estimates are intended to suggest the order of magnitude of the costs to Medicare of extending coverage, but the estimates could be considerably higher or lower than what Medicare might actually spend were coverage policies changed. The estimates cover the five-year period 2000-2004.

In addition to the conclusions about specific coverage issues, the report examines some broader concerns about the processes for making coverage decisions and about the research and organizational infrastructure for these decisions. It also briefly examines the limits of coverage as a means of improving health services and outcomes and the limits of evidence as a means of resolving policy and ethical questions.

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