New Medicare Cuts Affect Millions of Seniors with Diabetes

Jan 1, 1994

The Health Care Financing Administration (HCFA), a US federal agency, has established new Medicare reimbursement rates for home blood glucose testing strips. The new rates represent a huge drop from what Medicare has been paying, and could trigger a dramatic change in the availability of test strips to senior citizens.

For instance, under the old rule, Medicare allowed a reimbursement cap of $63 for a box of 50 strips in California; the new cap for that state is now $28.14 for the same number of strips. Pricing caps vary from state to state. For Connecticut, Vermont and Georgia, the new cap is $27.08. For Rhode Island, Kansas and Arizona, it is $31.86, which represents the maximum amount to be allowed in any state. Medicare actually reimburses 80% of these caps, with the other 20% paid for by the patient or the supplemental insurance carrier.

The new cuts are effective as of January 1, 1994 and have already created confusion and frustration in the diabetes community. Though seemingly in line with President Clinton's plan to lower health care costs, these new caps may actually limit access to health care for some individuals.

Coalition is Formed to Fight Prices

In response to the new cap on Medicare reimbursement for test strips, medical supply distributors and pharmacists have joined forces to protest the move. The recently-formed coalition has hired Irwin Cohen, of the law firm of Fullbright and Jaworski, L.L.P. in Washington D.C. to represent them and fight back against the new pricing. Cohen stated that the coalition has sent a letter to the HCFA stating that the new price is based on invalid data and is therefore unfair.

Additionally, the coalition claims to have been given insufficient notice of the policy change, and has asked to have implementation of the price restriction moved to a later date.

Diabetes is an Enormous Problem

There are over 14 million people with diabetes in this country, and 90-95% have non-insulin dependent (type II) diabetes. Between ages 65 and 74, nearly 17% of the Caucasian population, 25% of Black Americans and more than 33% of Hispanics have diabetes in the United States. Diabetes complications result in over 2.7 million hospitalizations per year, and diabetes care costs $40 billion annually, which is five percent of the nation's healthcare expenditures. Diabetes is the fourth leading cause of death.

Test strips are used by people with diabetes to monitor their blood glucose levels. Specifically, a droplet of blood is placed on the strip, which is then "read" by a monitoring meter to determine the body's blood sugar level. This information is essential so that the person with diabetes can calculate the correct dose of insulin or other diabetes medication to take. Keeping the blood sugar in the proper range has been proven to reduce diabetes complications by as much as 70 percent.

According to a 10-year, $165 million study by the National Institutes of Health (known as the Diabetes Control and Complications Trial) released in June of 1993, more frequent self-testing of blood glucose levels plays a critical role in helping people with diabetes delay or avoid the many complications of the disease, including blindness, kidney failure, strokes, and neurological disorders. The study concluded that "With intensive treatment, patients can expect to lead lives that are healthy and free of these devastating complications for a much longer time."

Strip Manufacturers Responses Vary

Rick Thompson, CEO for LifeScan Inc. said "Given the government's position on increasing access to health care, I don't think it is HCFA's intent to limit (people with diabetes') access to blood glucose monitoring supplies." He went on to say that "LifeScan is trying to help HCFA by sending them all the data we have pertaining to this issue."

LifeScan Inc., a Johnson & Johnson company, manufactures the number one best-selling brand of test strips. LifeScan's One Touch strips boast the highest dollar volume among all health and beauty aids in drug stores. A recent LifeScan pharmacy advertisement projected the blood glucose testing market to reach $940 million in sales for 1994 . The LifeScan advertisement also projected the market could quadruple due to the results of the DCCT. Currently, LifeScan sells its test strips to independent distributors and pharmacists at a wholesale price of approximately $28.50 per box.

Robert Oringer, president of Can-Am Care Corporation, a competing strip manufacturer that offers low-cost alternative (or "generic") strips for use in a number of leading meters, feels that the Medicare cutback "will force pharmacists and diabetes product dealers who serve Medicare patients to see no choice but to supply our lower-cost product if they are going to continue providing top-notch service to their patients while remaining profitable."

Another low-cost alternative strip manufacturer is Polymer Technology International., based in Issaquah, Washington. Their director of sales and marketing, Mike Sherman, stated "We are positioned for continued growth, and expect our business to increase in areas we haven't even gone after-like hospitals." Mr. Sherman felt the new coalition's efforts "would have no effect" on the recent Medicare cuts.

Can-Am Care and Polymer Technology International. stand to benefit from the cuts; with their wholesale price at $20 or less per box, their strips sell for 30-40 percent less than the leading brands.

Home Diagnostic Inc. manufactures the Diascan and Ultra meters and matching strips. Though their market share is tiny compared to the other companies, they are now poised to take advantage of the Medicare cuts. Claiming she was not able to publicly expose all her plans, Vice President Joan Scala had this to offer: "Home Diagnostic Inc. has been monitoring the Medicare situation and is trying to take a proactive stance. Medicare recipients should not have to compromise quality or reduce testing." She is currently helping large retailers all over the country to continue to sell supplies to their Medicare patients.

Retailers Cry "Unfair!"

According to Dan Chilton, the vice president of SugarFree Centers, a chain of diabetes product stores based in Los Angles and a member of the coalition, "The proposed cap is lower than the price we pay for strips. This will make it impossible for us to continue providing strips to individuals on Medicare." He went on to say that "limiting access to test strips means a sure rise in the number of complications associated with diabetes."

The SugarFree Center claims that they will be hard hit by this new rule because 65% of their strip customers are Medicare patients. Mr. Chilton stated that he needed to sell the strips for $43 per box to cover the cost of billing the government-which can cost as much as $20 per claim.

Bill Popomaronis, pharmacist and owner of Edwards & Anthony Pharmacy in Baltimore, Maryland, said his "customers are frustrated and angry." "This is a real nightmare; I've had to stop selling to Medicare recipients using the meters for which there are no generic strips available. The other big problem is that I can't get the generics-they are all on back-order." Mr. Popomaronis went on to say that "Many of my customers are on fixed incomes and will have to choose between testing supplies, food, or paying the rent. Which would you choose?"

Another firm specializing in diabetes supplies is Oxy Stat Inc. based in Miami, Florida. Owner Abraham Chames, MD, thinks the worst outcome of Medicare's decision may be that the "patient will no longer have the freedom of choice with respect to which meter they can use." "There are many meter brands for which no generic test strip exists" stated Dr. Chames. (See table on page 1-Jan.)

HCFA Reviewing Their Data

Meanwhile, the HCFA has been flooded with letters of protest from the coalition members and is reviewing its data to determine if an error was made. It is also checking into allegations made by coalition members that the HCFA ceiling is lower than the purchasing cost. However, Charles Booth, a spokesperson at HCFA for the Office of Payment policy stated that it would take until January 28th to review the historical data. Mr. Booth indicated that the new ceiling would remain in effect unless a mistake was made.

Mr. Booth went on to say that "This price change came about because the industry (strip and billing) had requested the HCFA re-look at its pricing structure." This according to Mr. Booth had the pricing "dragon dredged up."

Ironically, the strip and billing industry was apparently looking to get strip prices raised. Mr. Booth is acquainted with the lower-cost generic strips and stated "Why should the government pay for the more costly strip?" When asked if there would be enough lower-cost strips to supply all Medicare strip users he replied "This is America with the law of supply and demand. If generic strip makers can make more money-then they will make more strips."

(In a separate but related matter, Mr. Booth said that in addition to the cut backs for the strips, new regulations regarding blood glucose meter reimbursement had also been necessitated due to certain rebate situations. Many meter companies offer cash rebates to induce customers to purchase their brand. Apparently Medicare is concerned that they have been paying full price while the customer has received a cash rebate. The new cap announced January 6th sets $57 as the maximum Medicare will pay for a meter.)

People With Diabetes May Suffer

Several of the coalition members contacted for this article said that they had been forced to discontinue supplying blood glucose testing strips to their Medicare patients as of January 1st. They expressed concern that this could become a life-threatening situation for those patients unable to obtain the strips. Many suppliers have converted all their Medicare customers to a lower-cost alternative strip-where one is available for their brand of meter. One supplier has decided to switch all his Medicare customers to a brand of meter for which he can supply lower-cost strips.

Clearly this is a far-reaching issue that will affect millions of senior citizens with diabetes as well as people in the diabetes supply and distribution industries.

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Categories: Blood Glucose, Blood Sugar, Diabetes, Food, Health Insurance, Insulin


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