Refunds over caps to payors, including insurance companies

Proposition 8 on the November ballot as an initiated state statute seeks to place caps on dialysis treatment costs, requiring dialysis clinics to issue refunds over set caps to treatment payers — insurance companies or patients.

The measure has the distinction of being the most expensive on the ballot, with supporters and opponents spending more than $117 million to fund their positions.

At the center of the debate, although incidental in the maneuvering, are the 140,000 California patients who spend three to four hours a day, three days a week, to receive life-preserving kidney cleansing treatments while they wait to move to the top of  kidney transplant lists. Kidney failure leads to death, and dialysis maintains kidney function until patients can receive a kidney transplant.

Contending in this critical arena are a union, the Service Employees International Union, United Healthcare Workers West, and the private clinics that provide dialysis to California residents.

SEIU contends it was urged to launch this initiative by dialysis clinic employees who complained that clinic understaffing was seriously undermining patient care and well-being. Their measure, Prop 8, proposes to place a cap on what insurance companies pay for treatment (dialysis treatment is funded by Medicare and MediCal and private insurance companies). The cap would be 15 percent more than “the costs of direct patient care, pharmaceuticals, medical supplies and healthcare improvements.” Clinics providing treatment would be required to issue refunds to insurance providers or to patients for any charges above the rate cap.

SEIU argues that the cap would force clinics to hire more workers providing direct care to patients and invest in more patient care equipment so as to keep within the cap, since revenue spent on direct patient care and healthcare improvements would not be limited by the cap. Direct care costs are defined in the measure as “salaries, wages and benefits of non-managerial clinic workers who furnish direct care to dialysis patients; staff training and development; pharmaceuticals and medical supplies; costs associated with renting and maintaining facilities, utilities, lab testing; and depreciation of facilities and equipment.”

Clinics that do not issue required refunds within 201 days after the end of a fiscal year would be fined an amount equal to 5 percent of their total required refunds but not to exceed $100,000.

The measure also would prohibit dialysis clinics from refusing services based on a patient’s payer, including the patient, Medicare, MediCal or a private insurer.

Why is a union contending on the ballot with medical service providers? Opponents argue that the sole reason SEIU has launched this ballot initiative is to unionize workers in dialysis clinics. Said opposition spokesperson Kathy Fairbanks, “Sponsors want to bring the dialysis community to the table and unionize it. This [Prop 8] is just leverage.” 

SEIU spokesperson Sean Wherley said, “[We] want these reforms regardless of what happens with [our] union efforts. The goal of this ballot initiative is to hold the dialysis industry accountable and improve life for patients and for the people who care for them every day.

“One way [for the clinics] to get around the caps is to pump the excess money into the care itself, hire new workers, buy new equipment.”

Dialysis executives argue Prop 8 could force them to operate at a loss, reduce services and potentially shut down some centers, especially those in less urban areas. They argue that the way the measure defines “costs” amounts to just 69 percent of what it costs to actually run a clinic because it does not include paying for a medical director, nurse manager and clinical coordinator.

The nonprofit California Legislative Analyst’s Office notes that if clinics respond to passage of the initiative by scaling back operations, patients’ access to treatment could be disrupted, leading to health crises. “Missing even one appointment can be fatal for dialysis patients,” said Dr. Theodore Mazer, president of the California Medical Association. Opponents argue that if clinics close, dialysis patients could wind up in emergency rooms, costing taxpayers.

The LAO also notes that Prop 8 could significantly reduce dialysis centers’ profitability, but that overall fiscal impacts depend on how the dialysis industry would respond to new requirements.

There is little media editorial support for the measure.

In opposition, the San Jose Mercury News notes,” California has a long history of propositions gone awry. Proposition 8 provides a classic example of a ballot measure that has no business being decided by California voters. The complex initiative designed to regulate the dialysis industry is better suited for the Legislature where the working of new laws can be thoroughly vetted and easily altered if problems arise.”

The Santa Rosa Press Democrat states,” We don’t have a position on whether clinic employees should unionize. However, we’re absolutely certain that voters shouldn’t be asked to judge a regulatory scheme for a specialty medical procedure that literally is a mater of life and death for tens of thousands of California residents suffering from serious kidney disease. That’s a job for the Legislature and the state Department of Public Health Services.”


  1. The larger issue is that dialysis should be obsolete by now. In 2002, I published how to prevent 90% of dialysis (1). The remaining 10% of patients with kidney failure could all get a cadaver kidney (from a dead person) given current numbers. Unfortunately, nobody in healthcare has done the right thing in over 20 years and acted to eliminate dialysis (2); it’s simply too lucrative. Each dialysis patient brings in an average of $300K during their lifetime on the kidney machine. People of color go on dialysis 3-5X more than whites, so withholding knowledge about prevention is tantamount to medical slavery.
    1. Paper #1 at (abstract at PubMed ID: 12396747)
    2. Paper #9 at same URL