Have you heard about the new move by Medicare to slash prices of diabetes supplies by up to 72% this July, making a vial of test strips in many cases just $10.41 out-of-pocket?
Since Medicare generally sets the stage for competitive pricing across the board,
this may sound like amazing news for so many of us suffering from the “stinging cost of test strips“! However, we’ve learned that this move may not be a good thing for our community at large, in the long run…
Because this new super-low pricing requirement will likely force insurers to offer coverage on only a limited number of products — the cheapest and most “generic” — which means we PWDs will have less choice and an even harder time getting coverage for the best brands and new features we want and need. Ugh!
To understand all this, we did some quick research on the back story:
On Jan. 30, the Centers for Medicare & Medicaid Services (CMS) announced an average cut of 45% in reimbursement rates for Durable Medical Equipment (DME). The federal government agency had run a limited first round of “competitive bidding” for DME and mail-order programs in a handful of places last year, and now the agency’s expanding that program to 91 metro areas across the U.S. starting on July 1.
Diabetes Self-Management reports: “according to a fact sheet from Medicare, the new program is expected to slash the prices of mail-ordered diabetes testing supplies by 72%, with the savings shared between Medicare and participants in the program.”
A subscription-only “closer look” report from our friends at Close Concerns says this:
- As of now, a 50-count box of strips ordered through the limited mail order program costs $32.50. That reimbursement rate will be expanded to the retail area for Medicare patients starting April 1.
- In July when the mail-order plan and rates expand nationally, the allowable payment to suppliers for a 50-count box of strips will be $10.41, down 68% from the previous cost.
If you’re not hip to how Medicare works, fellow D-Blogger Stephen S wrote a nice Medicare-focused overview recently that’s worth reading. But here’s a very basic primer: The program pays 80% percent of product or service costs, and as the PWD with coverage, you pay 20%. When the rate goes down, you pay less — which is good, of course, although you’re still limited on how many strips you can get at a time.
But the flip-side to these less costly supplies is that insurers will only pay for those items provided by selected contract suppliers, whom they choose primarily for cost reasons, so D-supply availability will hinge even more on the choices of insurers, rather than patients.
Here’s what a bunch of authorities / observers have to say on the negative consequences:
A Feb. 28 story at online medical news site Diabetes In Control states:
“… Not everyone is happy with the new program. The DME industry, including manufacturers, suppliers and providers of medical equipment, believe that the new program ‘is offering fewer and lowest-cost products’ which will substantially discourage providers from offering brand name or more advanced products.”
And a Cleveland Plain Dealer story on Feb. 13 reported:
“Diabetics who must test their blood glucose levels daily, often multiple times a day, could have fewer choices of where to buy testing strips. The reason? The price drop of 72% is too low for some providers to stay in that business, they say.
“‘We are going to stop serving diabetic patients on Medicare. The pricing is below our cost,’ said Joel Marx, chairman of Cleveland-based Medical Service Co. ‘The diabetic market has just been decimated.’
“‘We’re frightened for our patients at this point,’ said Martha Rinker, chief advocacy officer for the American Association of Diabetic Educators (AADE), whose members work with patients to keep their disease under control.”
Yikes!
A Michigan newspaper story on March 5 paints an even more bleak picture, talking about DME suppliers potentially slashing workforces and curtailing access to test strips:
“The low payment rates—test strips will be reimbursed at $10.41 per box of 50—also have the potential to hurt providers’ referral relationships, they say. Off-brand products, even some of the better-known ones, can be a tough sell, say providers.
“’I’ve got one major endocrinologist that refuses to do business with us if we are not going to supply the brand names,’ said Dave Doubek, president of Doubek Medical Supply in Alsip, IL. ‘Referrals need to understand that, at some point, it’s impossible.’
“What does all this mean for beneficiaries? For starters, less choice and a lot less service, say providers.”
OK, maybe it could be bad if those fears are real…
But this only applies to PWDs on Medicare and Medicaid, and doesn’t apply to the rest of us, right? Right?!
Wrong. It does, and not only down the road once we get to Medicare age ourselves…
The oft-unspoken truth is that private insurers often take direction from what Medicare does. The federal coverage has long had an influence on commercial carriers, and Medicare’s physician fee schedule has long been a model of sorts for health plans to follow when setting up their own payment rates for providers across the U.S.
With massive changes coming in 2014 thanks to the Affordable Care Act, chances are even higher that those running health insurance exchanges will follow suit on the rock-bottom prices.
Think about it: 26 states opted to not run their own exchanges but rather rely on the federal government to do it for them, meaning that for the first time ever, the U.S. government will have to roll out insurance cost policies and plans for more than half the states. Another seven are working with the feds provisionally, while the rest of the states are doing their own thing with insurance commissioners… but even then, it’s quite likely they’ll decide to mimic what CMS has done so far.
This could have a profound impact on the future of diabetes devices and products. Research and innovation have the potential to see hindrances as a result of these cost changes, say industry watchers like those at Close Concerns. What companies spend on R&D to develop new products is usually based off a certain percentage of the company’s profits, so logically if less is being made, they may spend less to create innovative new D-tools.
So how ironic is that? We’ll finally be getting the lower prices we’ve been clamoring for, but it very well could hurt us in the long run.
What can we do about it?
CDE and author Gary Scheiner offers some good tips for dealing with this issue on a personal level.
On the larger lobbying front, one idea is to call our Congressional folk directly and let them know our stance. They make the final decisions on how health care policy plays out, so we can let them know that adopting these lower Medicare reimbursement rates without consumer protection in place could have some very negative consequences!
With Congress currently focused on the Sequester cuts, and both the American Diabetes Association and JDRF on Capitol Hill talking about these topics this month, this is a great time help out by calling or writing our regional lawmakers in D.C., too.
What do you think about the downsides of lower test strip prices? Let us know!
Wow! This is awful! I am not yet on Medicare, but my parents are, and what is going on now is nightmarish! If any of you diabetesmine folk are so inclined (since, because you have a blog with many followers) may I suggest that one of you contact Sixty Minutes? I think this story deserves to go on TV, before our A1Cs start rising due to inaccurate blood glucose meters!!!!!
My reason for being concerned about this change relates directly to my experience in a Medicaid demonstration pilot. During the enrollment phase, we learned first hand about some of the nasty ‘switching’ practices of DME providers – switching patients to different off brand meters based on kickbacks from manufacturers to increase DME profits.
The worst part was the complete and total lack of training provided to the patients when they received their new meter. This is a huge issue that should be addressed now. The new meter companies had better be ready to provide patient training although I fear that critical piece has been left of the chess board.
I find this info suspicious just on its face. The idea that the margins are too thin as to be profitable is preposterous. Per a Diabetes Forecast article from June 2012, ave cost to manf a strip is 15 cents. At $1 per strip, manf earn about 70-80% margin on test strips. They can reduce their margins, still make good money, and the ‘middleman’ distributors can either keep the wholesale cost savings (since they claim they are so thin) or pass the savings along to the customer.
It sounds to be like some people are afraid of losing profit so they are rattling the chains of some long term consequence to get the end users to protest.
In addition, all of this assumes that the market cannot bear these costs, which per above it can. And it cannot change and evolve – which is something our economy is very good at. An easy example, get rid of the distributors. have the goods bought and sold directly from the manf. There are still expenses involved, but less of a price hike as there is one less party adding profit to the product. Internet purchasing makes this a much more possible scenario and I would be surprised if it is not already in play or at least planning stages.
Here is another opportunity for the marketplace to flex and evolve: the GenStrips Diabetes Mine wrote about in Dec 2012. As a consumer, I would welcome this new lower priced competitor into the marketplace. Will they be sunk by legal crap? Maybe – by the same people who will whine about not being able to make enough money off of diabetes test strips. Of course they do not want to share their locked up market.
Reducing choice based on low margins is a simple economics lesson and it does happen, but I do not think that is the case here…look at the Time Magazine article from the Mar 4 2013 issue titled, ‘Bitter Pill.’ The whole healthcare industry needs an overhaul. I am not a fan of centralized anything, let alone medical care. However, we are being taken for a ride and this ‘alarm’ is just one more way we are being manipulated because we need these meds and have not exercised our influence in the market. Perhaps this move is the warm up to our full healthcare work out, where the consumer finally gets to dictate product features, cost, and quality.
So if I understand that the argument is that the costs are too low and will end up reducing choice, I reject that argument and insist that the diabetes gear providers – from researchers, to manufacturers, sellers, doctors, insurance companies, and anyone else involved STOP MAKING UNETHICAL LEVELS OF PROFIT OFF OF MY CHRONIC ILLNESS. Go earn your billions in scented hand lotion or anything else that is not vital to survival.
Why are the suppliers upset? If Medicare is paying 80%, then the $10 copay means each 50 test strip bottle is $50, a reasonable price. I pay less then that, with a 20% copay, for the Contour NEXT test strips through Medtronic. Maybe I’d have more sympathy if it weren’t for my experiences going through DME suppliers for CGMS/Pump supplies.
If this spreads to private plans, then I can’t see my choices getting more limited, since I’m already limited for my pharmacy benefits to two meter companies as is.
This is not a bad thing.
When you test your blood glucose, you are putting your blood on an electrode, that is probably reacting with glucose dehydrogenase. There is nothing innovative about test strips in principle.
Medicare should not be rewarding test strip manufacturers for antiquated technologies.
And, guess what, any engineer can figure out how to program all of those “neat” features on meters and insulin pumps, such as area under curve (AUC), daily bg average, standard deviation. It does not take talent. It however, makes a lot of money.
If the quality of meters and test strips (and even other types of DME) were actually substantially improving and emerging, I would be protesting Medicare’s lack of reimbursement for DME. But, guess what, it’s not.
Let us please not offend these fragile, saintly test strip companies and diabetes supply companies that depend for their survival on minimal profit margins of 70 to 80 percent in the interest of staying on top of the economic heap, an absolute necessity in this survival of the fittest economy.
They exist only so they can continue to serve us who depend on their benevolence.
Surely they only raise prices with merciless constancy on products that take little true innovation to produce so that they can continue their holy mission to help those of us who have no choice but to grin and pay if we wish to survive as well, in the more corporeal sense of the word, of course.
These saintly corporate entities need to be coddled and kowtowed to by anyone with a right mind.
Yes, they must thrive if we are to barely survive!
In no way should we ever suggest or even imply let alone threaten the idea of price controls or any such thing as human-based compassion as a basis for policy, nay, for fear of upsetting the entire brilliantly successful medical economic ecosystem.
This system has made so many deserving people rich and comfortable while only causing a very minimal percentage of US bankruptcies ( 60+% of US bankruptcies is caused by medical bills is such a small price to pay as a nation)
It has even kept hospital bills for the uninsured down to the point where they can actually, thankfully afford to pay up to 12% IN FULL if they struggle hard enough, grin and bear the debt collector’s friendly reminders, and don’t go bankrupt or keel over before reaching such a high mark.
If we try to change anything in this natural and holy medical marketplace, particularly in favor of those who suffer the most and bear the worst indignities, we surely risk making it even worse for them and for everyone else as well, and risk is a thing to be dreaded, unless you are too big to fail, in which case your failure will be taken out on those who are to small to succeed.
So please remember, they depend on us to depend on them for survival, and please, just don’t rock the boat! There are not enough lifeboats and if we cause too many waves more of us might get tossed overboard so the whole thing can continue to float!
As always with medical products companies it is the bottom line that is most important to them, so investment in R&D will definitely go down – which will have a negative effect on developing new and better products and devices for diabetics. Can the US government not force these companies to spend a larger percentage of their profits on R&D?
The major drawback of low priced diabetes supplies is that insurers will only pay for those items offered by selected contract suppliers. The company will choose them mainly for cost reasons. This will result in a hinge in accessibility of D-supply more on the choices of insurers as compared to the patients.
Government Rationing of healthcare. This is just the tip of the iceberg. Wait til Obamacare kicks in. Competition is going to be out the window as fewer companies can manage to continue in the business. Don’t believe it? Check how many MDs are either retiring early due to Obamacare or are just not going to take Medicare patients anymore. It IS happening all over. Obamacare robbed from Medicare making huge cuts. Everyone who championed Obamacare thinking “free healthcare to all” was naive and now we all will have to pay the price. The diabetes market is just a small part of it. The DME industry is huge and serves millions of seniors on Medicare who need these products. The DME companies cannot make a profit on these cuts. And all you simpletons who think they are all evil big suppliers are naive. The so called evil big suppliers are the ones who are big enough to survive the cuts. The smaller ones cannot and will be forced to get out of the market. Therefore the evil big companies will have monopolies and their customer service will be even worse than it is now. Think US Post Office type of service or VA Medical Centers. Anyone want to use those over Johns Hopkins or FedEx/UPS when you must get a package delivered overnight. I think not. We are doomed to mediocre healthcare unless we wise up before it is too late and repeal this bad law, aka Obamacare. Remember Polosi, “you have to pass the bill to know what is in it” Well, guess we are finally starting to find out what is in it. Just a darn shame.
The title of this says it all. Prices dropping not a good thing. Remember, there is no such thing as a free lunch. And my healthcare is much more important than a lunch.
My prediction: In the fallout of Obamacare and ACO’s, a new breed of specialized health plans will emerge mostly in part due to the recent availability of automated biometric patient medication adherence data collection as a method of delineating those patients who strive for better health by doing those proscribed behaviors and those who are diagnosed with the same condition and choose not to. I had this thought a long time ago but the current situation is ripe for an innovative approach.
It’s hard for me to wrap my head around how complicated (and expensive) life can be for diabetics! I am lucky enough to currently be on both medicare and medicaid so I am (for the time being) getting my strips for free. Before I was approved for these programs, I struggled constantly to afford my strips and was tickled to death when Walmart came out with their $9 test strips. Although not 100% accurate, they are better then my past efforts of (sometimes) “guessing” my BG. That being said, even with my current compo of medicare and medicaid there are constant hoops I have to jump through to get my strips. Medicare only wants to cover testing 3 times a day. Being a extremely brittle diabetic, I test more like 8-10 times a day. Letters/referrals from two different doctors and faxing my BG logs seem to keep them happy, so I do what they ask and enjoy not having to miss meals so that I can afford my test strips/medication. With the cost of brand name prescriptions rising (13% from September 2011 to September 2012), I will gladly take any cuts I can get. And while having to track down test strips will be very inconvenient, diabetics will track them down to the ends of the earth, because they play a huge role in keeping us healthy.Its hard to know if the price drop will be good or bad for the diabetic community. I can only hope that it will be for the best.. we need some good news now and then.
I work at a durable medical supply company in rural southern Illinois. We have supplies diabetic testing supplies for over 30 years. Unfortunately, we have made the decision to let our patients know that we are getting out of diabetic supply business for good. Companies cannot operate on the margin Medicare is pushing on us. The cost of any decent test strip is more than the allowable fee, not to mention intake payroll, billing payroll, and keeping up with the ever increasing documentation demands. Sure the patient thinks lowering fees is a good thing, until they can’t find any reputable company to service them. Goodbye customer service! People around here will likely have to drive 45 minutes or more just to get some no name test strips that aren’t accurate. Even worse, they will get hooked up with a mail order company. You should hear those horror stories.