ESRD occurs when an individual's kidneys have regressed to less than 10 percent of normal baseline function. Without functioning kidneys, excess wastes and fluids in the body rise to dangerous levels, and certain hormones are no longer produced. Individuals with ESRD must undergo either regular dialysis treatments or receive kidney transplants to survive. As of the end of 2004, of the approximately 480,000 adults with ESRD (those at least 18 years old), just over one-fourth (about 130,000) had functioning kidney transplants and two-thirds (about 330,000) were receiving dialysis treatments. In addition, of the almost 5,700 pediatric individuals with ESRD (those younger than 18 years old), approximately two-thirds (about 3,800) had functioning transplants and less than one- third (about 1,700) were receiving dialysis treatments. A kidney transplant is the preferred method of treatment for individuals with ESRD because it increases an individual's quality of life and decreases long-term mortality rates compared with lifetime dialysis treatments. Studies have reported that pediatric ESRD patients tend to perform better developmentally with transplants than on dialysis. For example, one study reported improvement in neurological development in infants aged 6-11 months following transplantation. Another study showed that transplantation increased the rate at which pediatric ESRD patients improved on measures of intelligence and mathematical skills. Medicare covers over 80 percent of all individuals with ESRD. For these individuals, Medicare covers the cost of lifetime dialysis treatments, or for individuals who receive kidney transplants, the cost of the transplants and 3 years of follow-up care--including immunosuppressive medications needed to sustain the transplants. Medicare also covers hospital inpatient services and outpatient services, such as physician visits and laboratory tests, as well as medical evaluations provided to living donors and recipients in anticipation of transplants. In addition to Medicare, individuals with ESRD may be covered by other public or private health insurance, such as Medicaid or an employer-sponsored health plan. For individuals who are eligible for Medicare on the basis of ESRD, Medicare is the secondary payer if the individuals have employer-sponsored group health insurance coverage during the first 30 months of Medicare coverage. After the first 30 months, Medicare becomes the primary payer for these beneficiaries until they are no longer entitled to Medicare. For an individual who is eligible for Medicare solely because of ESRD and who has a kidney transplant, Medicare coverage ends on the last day of the 36th month after the individual receives the transplant unless the individual is entitled to Medicare other than because of ESRD. However, after 36 months, a transplant recipient can become eligible for Medicare again after a transplant failure and subsequently receive a retransplant or dialysis. Following termination of Medicare coverage, individuals who are unable to pay for immunosuppressive medications and other transplant-related follow-up care must rely on other public or private health insurance or charity care. Pediatric recipients have several potential sources of coverage when their Medicare coverage ends: private health insurance-- generally, a parent's employer-sponsored coverage; Medicaid; the State Children's Health Insurance Program (SCHIP); and charity care. However, once individuals turn 19, they may lose access to their parents' private insurance coverage as well as coverage under SCHIP and Medicaid. Individuals who receive kidney transplants require immunosuppressive therapy--usually a combination of at least two different immunosuppressive medications--as well as regular laboratory tests to monitor and maintain their transplants. Although the frequency of laboratory tests decreases over time, the need for immunosuppressive medications continues for the life of the transplant. Recipients who do not take their immunosuppressive medications according to the prescribed regimens are more likely to have their transplanted kidneys fail. Studies have shown that not only does medication noncompliance cause 13 to 35 percent of transplants to fail, one of the studies indicated that it also causes recipients to die at rates fourfold greater than compliant recipients. One recent study showed that about 23 percent of recipients with failed transplants who returned to dialysis died within 2 years. Several studies have reported that there are a number of reasons why some transplant recipients do not comply with their medication regimens. More specifically, one study reported that adverse side effects of the medications, difficulty following complex treatment regimens that involve several drugs and varying schedules of dosing, and an inability to pay for medications due to a lack of health insurance coverage, among other reasons, can contribute to medication noncompliance. Other studies have reported that medication noncompliance can be unpredictable, often without an identifiable reason. Studies have also shown that adolescent recipients are especially prone to medication noncompliance or partial compliance. For example, one study showed that for individuals aged 12 to 19 years, dissatisfaction with body image and the physical side effects of medications have been linked to poor compliance with prescribed transplant medication regimens. Another study found that 57 percent of participating recipients under 20 years old were not compliant with their medication regimens, compared with only 15 percent of participants over 40 years old. Pediatric, transitional, and adult kidney transplant recipients were similar with respect to sex, race, and income level. As of December 31, 2004, all three age groups were predominately male, white, and lived in counties with a median annual household income of $25,000 to less than $50,000. However, the three groups differed in terms of their types of health insurance coverage, with a smaller percentage of pediatric and transitional recipients covered by Medicare compared to their adult counterparts. Based on our analyses of USRDS and ARF data, we found that pediatric, transitional, and adult recipients were similar with respect to sex, race, and income level, as of December 31, 2004. All three age groups were predominantly male, and the proportion of males in each age group was higher than that found in the general U.S. population--49 percent (see table 1). Approximately 59 percent of individuals with ESRD are male. All three age groups were also predominantly white, and the percentage distribution of other races among the three groups was similar (see table 2). Although a higher percentage of transitional recipients were white and a lower percentage were black compared with pediatric and adult recipients, the differences were not substantial. In addition, the distribution of racial groups among pediatric, transitional, and adult transplant recipients was similar to that found in the general U.S. population. Pediatric, transitional, and adult transplant recipients were similar in terms of their household income level (see table 3). Seventy-five percent of recipients in each age group resided in counties with a median annual household income of $25,000 to less than $50,000, which is almost three times the percentage for the general U.S. population (27 percent). When compared to the general U.S. population, a very small percentage of recipients in each of the three age groups resided in counties with the lowest and highest median annual household incomes--less than $25,000 or $75,000 or more, respectively. About 27 percent of the U.S. population resided in counties with a median annual household income of less than $25,000 and about 28 percent resided in counties with a median annual household income of $75,000 or more. While pediatric, transitional, and adult transplant recipients were similar in terms of sex, race, and income, they were less similar in terms of their health insurance coverage. As of December 31, 2004, while more than two-thirds of adult recipients had coverage under Medicare, just over one- third of pediatric recipients and slightly less than half of transitional recipients were covered under Medicare (see table 4). Although each group had about the same percentage of recipients with both Medicare and Medicaid coverage, almost three times as many adult recipients had Medicare but not Medicaid coverage compared with pediatric recipients, and almost twice as many adult recipients had Medicare but not Medicaid coverage compared with transitional recipients. Although still smaller than the percentage of adult recipients, based on our analysis of USRDS data, a larger percentage of pediatric and transitional recipients had Medicare coverage at the time of their transplants-- 67 percent and 81 percent, respectively, compared to 87 percent. It is not known why these differences in Medicare coverage existed, given that most individuals who have ESRD are eligible for Medicare coverage. Our analysis of data from the USRDS show that after the first year posttransplant, a higher percentage of transitional recipients experienced a transplant failure compared with their pediatric and adult counterparts. In addition, the largest increase in transplant failure among the three age groups occurred in the first 3 years posttransplant--before termination of Medicare coverage--and the increase was substantially higher for transitional recipients than for pediatric and adult recipients. After experiencing a transplant failure, a higher percentage of transitional recipients received dialysis, a higher percentage of pediatric recipients received retransplants after the first year posttransplant, and a higher percentage of adult recipients died. Based on our analysis of USRDS data, we found that after the first year posttransplant, a higher percentage of transitional recipients experienced a transplant failure when compared with their pediatric and adult counterparts (see fig. 1). For example, we found that by 5 years posttransplant, the percentage of transitional recipients who experienced a transplant failure (33 percent) was about twice as high as the percentage of pediatric recipients (16 percent) and somewhat higher than adult recipients (28 percent). According to several representatives of pediatric kidney transplant centers that we interviewed, adolescent kidney transplant recipients--who generally populate our transitional age group--are less likely than other age groups to comply with their medication regimens, which, among other things, can lead to transplant failure. The largest increase in the percentage of transitional recipients who experienced a transplant failure occurred in the first 3 years posttransplant, and this increase was substantially higher than the increase for pediatric and adult recipients. Specifically, the percentage of failures for transitional recipients increased by 133 percent between 1 and 3 years posttransplant, while the percentage increases for pediatric and adult recipients were 83 and 100 percent, respectively. After 3 years posttransplant, all three age groups showed a smaller increase in transplant failures when compared with the period between 1 and 3 years posttransplant. Between 3 and 5 years posttransplant, the percentage increase in transplant failures was 45 percent for pediatric, 57 percent for transitional, and 56 percent for adult recipients. The percentage increase in failures remained lower during the 5 to 7 years posttransplant period--63 percent, 33 percent, and 43 percent for pediatric, transitional, and adult recipients, respectively. Failure to see a large percentage increase of transplant failures in pediatric and transitional recipients beyond 3 years posttransplant, when Medicare coverage terminates for many recipients, may be explained by the practices of transplant centers. Representatives from pediatric kidney transplant centers with whom we spoke stated that once Medicare coverage ends, they either help recipients to acquire other health insurance coverage or provide them with free or reduced-cost immunosuppressive medications if they lack health insurance coverage or otherwise cannot afford the medications. They also stated that the percentage of recipients who experience transplant failures because of an inability to pay for their medications after Medicare coverage ends (3 years posttransplant) is low. Based on our analysis of USRDS data, we found that after experiencing transplant failures, a higher percentage of transitional recipients received dialysis, a higher percentage of pediatric recipients received retransplants after the first year posttransplant, and a higher percentage of adult recipients died (see figs. 2, 3, and 4). By 7 years posttransplant, the percentage of transitional recipients who received dialysis after experiencing a transplant failure was nearly 30 percent higher than that of pediatric recipients and nearly 60 percent higher than that of adult recipients. In addition, at 7 years posttransplant, the percentage of pediatric recipients who received retransplants after experiencing a transplant failure was over 25 percent higher than that of transitional recipients and more than twice the percentage of adults who received retransplants. The percentage of adults who died following a transplant failure was about twice as high as the percentage of pediatric recipients and about three times as high as transitional recipients. Based on our analysis of USRDS data, we found that recipients who had both Medicare and Medicaid coverage experienced a higher percentage of transplant failures compared with those who had Medicare but not Medicaid coverage or were in the Other category (see fig. 5). By 7 years posttransplant, the percentage of recipients covered by both Medicare and Medicaid who experienced a transplant failure was slightly higher (24 percent) than recipients covered by Medicare but not Medicaid and was more than three times as high as the percentage of recipients in the Other category. After experiencing a transplant failure, a higher percentage of recipients who had both Medicare and Medicaid coverage received dialysis when compared with recipients who had Medicare but not Medicaid coverage or were in the Other category (see fig. 6). For example, by 7 years posttransplant, the percentage of recipients covered by both Medicare and Medicaid who received dialysis after experiencing a transplant failure was about 70 percent higher than recipients in the Other category. After the first year posttransplant, the percentage of recipients covered by both Medicare and Medicaid who received dialysis after a transplant failure was substantially higher than the percentage for recipients in the Other category. Based on our analysis of USRDS data, we found that Medicare beneficiaries with functioning transplants cost substantially less per year to treat than those beneficiaries who experienced transplant failures. Specifically, we found that overall, the median annual Medicare cost for a beneficiary with a functioning transplant was $8,550, compared with a median annual Medicare cost of $50,938 for a beneficiary after a transplant failure--a difference of 500 percent. For pediatric beneficiaries, the percentage difference was even higher--the median annual Medicare cost after a transplant failure was 750 percent higher than for a functioning transplant (see table 5). The differences for transitional and adult beneficiaries were 550 percent and 500 percent, respectively. The substantial cost of treating transplant recipients who experience transplant failures underscores the importance of maintaining functioning kidney transplants. While there are many reasons that could account for transplant failures during the first 3 years posttransplant--including medication noncompliance--the large percentage increase in transplant failures from 1 year to 3 years posttransplant for transitional recipients cannot be attributed to an inability to access immunosuppressive medications due to a lack of Medicare coverage. In commenting on a draft of this report, CMS stated that it appreciated our interest in kidney transplant patients and in the cost of care provided to those receiving transplants or dialysis. CMS stated that it was concerned about the quality of care and the outcomes experienced by Medicare beneficiaries, including the higher rate of transplant failure among transitional patients. CMS also stated that educating beneficiaries with kidney failure is critical to improving beneficiaries' ability to actively participate in and make informed decisions about their care. As a result, the agency engages in numerous educational and outreach efforts targeted to beneficiaries, providers, and national organizations that represent renal patients. CMS's comments are reprinted in appendix I. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution of it until 30 days from the date of this letter. At that time, we will send copies of this report to the Secretary of HHS and to other interested parties. In addition, this report will be available at no charge on GAO's Web site at http://www.gao.gov. We will also make copies available to others upon request. If you or your staff have any questions about this report, please call me at (202) 512-7114 or ekstrandl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Nancy Edwards, Assistant Director; Kelly DeMots; Krister Friday; Joanna Hiatt; Xiaoyi Huang; Martha Kelly; and Ba Lin made key contributions to this report.

Summary:
For individuals with end-stage renal disease (ESRD), the permanent loss of kidney function, Medicare covers kidney transplants and 36 months of follow-up care. Kidney transplant recipients must take costly medications to avoid transplant failure. Unless a transplant recipient is eligible for Medicare other than on the basis of ESRD, Medicare coverage, including that for medications, ends 36 months posttransplant. Pediatric transplant recipients, including those who were under 18 when transplanted but are now adults (transitional recipients), may be more likely than their adult counterparts to lose access to medications once Medicare coverage ends because they may lack access to other health insurance coverage. GAO was asked to examine (1) the percentage of transplant failures and subsequent outcomes--retransplant, dialysis, or death--among pediatric, transitional, and adult kidney transplant recipients and (2) how the cost to Medicare for a beneficiary with a functioning transplant compares with the cost for a beneficiary with a transplant failure. To do this, GAO analyzed 1997 through 2004 data from the United States Renal Data System (USRDS) and interviewed officials from pediatric transplant centers. The Centers for Medicare & Medicaid Services--the agency that administers Medicare--commented that it is concerned about beneficiary outcomes and has an education program to help them. The percentage of kidney transplant recipients who experience a transplant failure varies by age group as do the percentages who experience dialysis, retransplant, or death. After the first year posttransplant, a higher percentage of transitional recipients (those younger than 18 at the time of their transplants and at least 18 as of December 31, 2004) experienced a transplant failure and subsequently received dialysis compared with their pediatric (those younger than 18 as of December 31, 2004) and adult (those at least 18 at the time of their transplants) counterparts. By 5 years posttransplant, the percentage of transitional recipients who experienced a transplant failure (33 percent) was about twice as high as pediatric recipients (16 percent) and somewhat higher than adult recipients (28 percent). The largest increase in transplant failures for each age group occurred in the first 3 years posttransplant--before the termination of Medicare coverage on the basis of ESRD--and the increase was substantially higher for transitional recipients (133 percent) than for pediatric (83 percent) and adult (100 percent) recipients. Medicare beneficiaries with functioning transplants cost substantially less per year to treat than those who experienced a transplant failure. GAO found that the median annual Medicare cost for a beneficiary whose transplant failed ($50,938) was 500 percent more than the median annual Medicare cost for a beneficiary with a functioning transplant ($8,550). This percentage difference was consistent across transplant recipient age groups. The substantial cost of treating transplant recipients who experience a transplant failure underscores the importance of maintaining functioning kidney transplants. While there are many reasons that could account for transplant failures, the large percentage increase in transplant failures from 1 year to 3 years posttransplant for transitional recipients cannot be attributed to an inability to access medications due to a lack of Medicare coverage.