Package pushes diabetes payments off a cliff

'I don’t know that Congress knows what they did'
Friday, January 4, 2013

WASHINGTON – Medicare payments for all diabetes testing supplies stand to be drastically reduced this summer.

The “fiscal cliff” legislation passed by Congress on Jan. 2 included a provision that would reduce the Medicare payment amounts for diabetes testing supplies obtained at retail settings to the Round 2 rates when those rates go into effect July 1.

“I don’t know that Congress knows exactly what they did,” said attorney Seth Lundy, a partner with King & Spalding. “The pricing that’s going to come out under bidding could be even lower than what came out in Round 1 and, simply put, at the Round 1 pricing, retail providers wouldn’t be able to furnish diabetes testing supplies without significant changes in the rate structure from manufacturers.”

The current average price for test strips is $37.67 for retail vs. $13.88 to $15.62 for mail order in Round 1 areas. Round 2 pricing is expected to be similarly low.

Retail providers won’t have to bid, but it’s likely that many will opt not to provide the supplies for Medicare beneficiaries, or offer lower-priced off-brand products, say stakeholders.

“You always had a safety valve when you had the retail option,” said Walt Gorski, vice president of government affairs for AAHomecare. “This could (limit) access to the most commonly prescribed supplies that are out there.”

Not everyone thinks paying for all diabetes testing supplies at the same price is a bad idea. The bifurcated system creates an uneven playing field and more potential for fraud, waste and abuse—a problem that only gets worse if it’s not addressed, says Michael Iskra, a founding member of the Quality Diabetes Care Coalition.

“When you go to a national program, it becomes a much bigger problem and it’s not good for anybody,” he said. “We are not saying that the lower competitive bidding pricing is the right pricing, we are saying that there shouldn’t be a discrepancy.”

Meanwhile, stakeholders were already reaching out to lawmakers to share their concerns on the new legislation and lobby for change.

“For now, the question is whether there is any interest in moving forward with changing this because this is the death knell for small pharmacies providing these supplies,” said John Coster, senior vice president of government affairs for the National Community Pharmacists Association (NCPA). “We would like to take the lead on this in a future Medicare bill to try to include some sort of modification or change.”


As a small business owner (DME), I for one think it is about time CMS/Congress recognize the enormous disparity between mail order/non-mail order reimbursements.  Can someone give me a good argument/rational to NOT level the playing field for everyone?  Or are there those who feel it is fair for a Medicalre beneficiary to be able to get a One Touch strip at a pharmacy, but not be able to get the same strip from a DME whom they have been getting their strips for years?  Or that Medicare pay 15.00 for a value strip, but pay 37.00 for the premier strip?  Or the beneficiary have to pay more co-insurance if he/she gets his strips at the pharmacy vs. mail-order?   If we DME's have to deal with the realities of a national competitive bid, it only makes sense (and about time), that large retailers have to do the same.  

I also want to know why now there is an outrage about how this is going to effect beneficiaries?  Maybe it is just me, but it seemed less a concern when only mail order DME's were being affected by the national bid.  Could this be because the prevailing thought was that  beneficiaries could be taken by the the large pharmacies, and at the expense of countless small business DME's who would no longer be able to compete for their piece of the "referral pie".  

Perhaps maybe, just maybe, the major manufacturers will reduce the costs of their strips to meet the demands of competitive bidding and share in the burden like the rest of us.  The alternative, NOW, would be that they risk to lose a significant portion of the diabetic test strip market.

Just some thoughts...

Rick Puckett,

President, Life Source Medical, Greensboro, NC