Latest GAO Report Disputes Criticism of Controversial Test Strip Program

A recent report from the Government Accountability Office mostly concurs with CMS on a dispute over problems with the Medicare competitive bidding program, following an explosive study in Diabetes Care that found beneficiaries lost access to key supplies.
Published Online: December 13, 2016
Andrew Smith
CMS claims that its competitive bidding program (CBP) is saving Medicare hundreds of millions of dollars per year on diabetes care by driving down the cost of self-monitoring supplies and reducing fraud.

In a new report, investigators from the General Accountability Office (GAO) tend to agree,1 while scholars and patient advocates dispute these claims. CMS refutes criticism that its CBP has   caused patients to stop monitoring themselves properly, that the program has led to more hospitalizations and deaths, and that extra hospital costs have exceeded savings on supplies. 

    Just before Evidence-Based Diabetes Management™ went to press, CMS responded by e-mail to questions sent more than a month prior, which concerned the origins of the CBP and complaints from patient advocates that the program has not maintained acceptable safety and service levels for persons with diabetes. Information about the agency’s positions also comes from documents it has published and from a GAO report on the CBP issued in mid-September and publicly released on October 17, 2016.1

  Historically, Medicare used a fee schedule, which increased annually, to set reimbursement rates for physician-prescribed durable medical equipment, along with test strips and other products that insulin users need to monitor blood sugar. Congress mandated in 20032 that CMS switch to a competitive bidding system after reports from the GAO and other federal investigators found the old system to be plagued by above-market prices and outright fraud.3,4 In its e-mail response, CMS said that earlier study results from the GAO and others showed that the old payment system caused Medicare to spend 3 to 4 times the amount paid by commercial insurers for some supplies.The CBP is still being rolled out in stages to various parts of the country. Under the program, qualified suppliers that wish to provide covered equipment to Medicare patients in particular areas are invited to give their best price on products and guarantee them for 3 years. Medicare will then offer contracts to as many bidding suppliers as needed to satisfy demand for a particular item, starting with the lowest bidder and working up through the list.

  Medicare’s offer will equal the median of the bids from the winning suppliers, so companies that accept contract offers in any given market will get the same rate. (Rates can, and do, vary significantly from high-cost markets to low-cost markets.) Once the contracts go into effect in a particular market, local Medicare patients who have not received individual exemptions must buy from contracted suppliers, who, in turn, must sell to all Medicare patients at the contracted rate.5   In 2010, the initial phase of the program brought competitive bidding to 10 markets. In 2013, the second phase brought bidding to 100 markets, along with a national mail order program for diabetes testing supplies.6 If all goes according to schedule, suppliers will have to bid for contracts in all US markets by 2017.  

CMS told the GAO that the CBP has produced dramatic savings. The agency reports that a combination of lower payment rates and less product overuse cut $3.6 billion from equipment spending in the 2-year period starting when phase 2 went into effect.1 Much of the savings came from greatly reduced prices. Single payment amounts in competitive-bidding areas averaged 45% less than payments in fee-schedule areas. The numbers were even more eye-popping for the national mail order program for diabetes supplies: contract winners charged an average of 72% less to supply an item through the mail than stores charged for comparable products in areas still operating under the fee schedule. In its e-mail response, CMS said the agency has a “sophisticated active claims surveillance system” that keeps track of patient access to supplies and health outcomes. “To this point, the system has not detected any negative trends in access or health outcomes under the program,” the e-mail also stated. Results can be viewed on CMS’ website.

  AADE Survey Uncovers Problems

  Critics disagree that Medicare’s 20 contracted mail order suppliers are, in fact, supplying comparable products. Systems that use strips to test blood sugar vary enough that patients develop significant preferences for particular brands and some struggle to measure their blood sugar levels correctly when they are forced to switch from one brand to another.   In theory, most patients with diabetes should be able to keep using their chosen brands under competitive bidding. Legislation requires that each company that wins a contract to supply a product under the CBP must offer a range of products that account for at least 50% of all sales for that product type. However, a 2014 survey by the American Association of Diabetes Educators (AADE) found that patients who want to get test strips through the mail are effectively forced to switch from popular and well-respected brands to cheaper brands with questionable accuracy.  

“In this study, 7 diabetes educators contacted 23 suppliers and found that none of the suppliers offer products reflecting greater than 50% of the market, as intended by Congress, and that only 3
suppliers carry each brand of diabetes testing supplies (DTS) they reported as carrying to Medicare. These findings demonstrate that as a result of the CBP, Medicare beneficiaries have fewer choices and limited access to the DTS most commonly used. Beneficiaries participating in the CBP are effectively being made to either switch to different testing systems or purchase DTS through non–mail order settings. This study results also demonstrate that the information on Medicare’s website continues to be inaccurate and that the information from the suppliers is inconsistent,” read the AADE study.7
 
“When a beneficiary is forced to switch to a testing system that is unsuitable, unknown, confusing, or unreliable, testing compliance may diminish or even cease. Poor blood glucose management can increase the risk of complications.”
 
Beneficiaries Receive Fewer Supplies

  Reductions in equipment prices were not the only source of the savings brought to light by phase 2 of the CBP. The rest of the savings came from reductions in equipment purchases: from 2012
to 2014, the number of beneficiaries receiving any equipment or supply covered by the CBP fell nationwide, but utilization fell far less in fee-schedule areas (6%) than it did in phase 2 bidding markets (17%). The introduction of competitive bidding had an even more dramatic effect on the percentage of patients with diabetes receiving supplies through the mail; there was a 39% decrease between 2012 and 2014, and that decline was only partially offset by a 13% increase in patients receiving such items at pharmacies and other retail outlets.  

According to the GAO report, CMS believes the overwhelming majority of the decline stems from a sharp drop in careless overutilization and fraud.1 The organization, which estimated that improper Medicare payments were almost $50 billion (of the program’s $586 billion expenditures) in fiscal year 2013,8 has undertaken a number of anti-fraud efforts in recent years. A number of those rules have been aimed at the durable medical equipment program. For example, CMS recently announced a national rollout for prior authorization rules that cut expenditures on certain fraud-prone items by as much as 80% in high-fraud markets where the rules were tested.9


CMS believes that the CBP is also proving to be a very effective anti-fraud program. First, by eliminating the price premiums that Medicare had paid for many supplies, it has reduced the incentive
for fraud. Moreover, by implementing a thorough certification process for all bidders—and by dramatically reducing the total number of suppliers it does business with—the CBP has made it harder for the unscrupulous to get into the system and easier to find those who do. (CMS was already culling its supplier list: between 2011 and 2016, it revoked billing privileges for 543,100
suppliers.)1

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