Anemia is an important cause of morbidity, and may be associated with increased mortality in patients with end-stage renal disease (ESRD) receiving dialysis. Therapy with recombinant human erythropoietin (rHuEPO) has revolutionized the care of ESRD patients, but this is a costly medication and concerns have been expressed about whether the outcome, as measured by achieved hematocrit (Hct), could be improved. The number and proportion of ESRD patients receiving rHuEPO increased steadily from 1995 to 1998, as did the dose of rHuEPO per patient. The amount of intravenous iron administered to patients increased markedly over the study period. The patients' mean hematocrit also rose, but proportionally less over the study period. The increase in both the amounts of payments per patient for rHuEPO, and the number of patients receiving rHuEPO over this time has resulted in a marked increase in the total costs to Medicare for this therapy. We suggest that a combination of payment regulations, provider financial opportunities and disincentives, and patient resistance to the effects of rHuEPO, as a result of both iron deficiency and inflammation, largely explain the findings.