The Diabetes Epidemic and Potential Reduction In the Cost of Treating Medicaid Eligible Texans with Diabetes

Prepared by Richard Thoennes, Healthcare Consultant with more than 15 years experience providing solutions for Managed Care, Retail Drug, Drug Wholesalers and

Durable Medical Equipment Companies aimed at Improving Healthcare Delivery & Outcomes while Maximizing Profits & Reducing Costs

November 2010

The Diabetes Epidemic • Diabetes affects nearly 24 million people in the United States, an increase of more than 3 million in

approximately two years, This means that nearly 8 percent of the U.S. population has diabetes. Another 57 million people are estimated to have pre-diabetes, a condition that puts people at increased risk for diabetes.

• Diabetes is the leading cause of blindness, kidney failure and leg amputations in adults. Stroke, heart attack, congestive heart failure and hypertension are all seen more commonly among diabetics.

• Complications of diabetes are consequences of damage to the vascular system. The organs most frequently and dramatically affected by micro-vascular changes are the eyes and kidneys. The sites affected by macro-vascular disease are the heart, brain and the lower extremities.

• Type 2 Diabetes complications and associated costs are largely avoidable (i.e., healthy diet, regular exercise, etc.), because obesity is a significant risk factor for the development of Type 2 diabetes and because diabetic complications typically develop over a 20-to 30-year time frame.

• Prevalence of Diabetes in Texas for both diagnosed and undiagnosed diabetes is 2.1 million. – An estimated 1.7 million persons aged eighteen years and older in Texas (9.7% of this age group) have been

diagnosed with diabetes. Nationwide, 8.3% of this age group have been diagnosed with diabetes.

• Prevalence of Undiagnosed Diabetes: – Another estimated 425,157 persons aged eighteen years and older in Texas are believed to have undiagnosed

diabetes (based on 2003-2006 NHANES age-adjusted prevalence estimate of 2.5% of persons twenty years of age and older).

Source: 2007 prevalence data estimates Centers for Disease Control and Prevention and 2008 Texas Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, for persons who are eighteen years of age and older. Data include both type 1 and type 2 diabetes.

Prevalence of Diabetes, US and Texas, 1995 - 2008*

0

2

4

6

8

10

12

14

16

18

20

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

YEAR

%

Texas

US

*Source: Texas Diabetes Institute utilizing CDC Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008, for persons who are eighteen years of age

and older, and include both Type 1 and Type 2 Diabetes. Persons with diabetes include those who report that they have been told by a doctor that they have diabetes.

Diabetes in Texas, 2008* 9.7% Diabetes in US, 2008* 8.3%

Texas Projected Diabetes Cases 2000 - 2040*

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2000 2010 2020 2030 2040

YEAR *Uses 2007 diabetes prevalence by race/ethnicity from BRFSS and population data from the Texas State Data Center - Office of the State Demographer, Institute for Demographic and Socioeconomic Research. Uses 0.5

migration scenario.

Nu

mb

er

of

Dia

be

tes

Ca

se

s

Hispanic (Prevalence = 12.3%) Black, non-Hispanic (Prevalence = 12.9%)

White, non-Hispanic (Prevalence = 8.5%) TOTAL (Prevalence = 10.3%)

Diabetes Prevalence by Race/Ethnicity, 2008*

Area: Texas 9.7% 1,205,993

Race/Ethnicity Prevalence Estimated # of People

White, non-Hispanic

8.3% 736,987

Black, non-Hispanic

13.0% 251,543

Hispanic 11.1% 680,351

Other 7.5% 59,389

*Source: Texas Diabetes Institute using Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008. Note: All reported rates (%) are weighted for Texas demographics and the probability of selection and thus are not derived from the simple division of numerator and denominator cases.

Educational Level Prevalence

No High School Diploma 14.2%

High School Graduate 9.7%

Some College 9.8%

College + 6.9%

Diabetes Prevalence by Educational Level, TX, 2008*

Diabetes Prevalence Texas, 2008*

The Economic Cost of Diabetes • Cost of Diagnosed Diabetes*

– Diabetes cost the U.S. economy about $174 billion in 2007 in medical expenses and lost productivity

• Cost of Undiagnosed Diabetes*

– National economic costs associated with undiagnosed diabetes, could raise the estimate to more than $192 billion.

– It is estimated that undiagnosed diabetes in 2007 cost an additional $2,864 per person, or a total of $18 billion per year.

– Yearly health care needs for individuals with undiagnosed diabetes tend to be higher than for persons who do not have diabetes.

– The health care costs associated with diabetes begin to increase at least 8 years before diagnosis and grow at a faster rate shortly before and after diagnosis.

– Complications often present in people with newly diagnosed diabetes include retina damage, nerve pain and heart disease.

– Programs aimed at earlier detection and treatment could help reduce these costs.

Source“: The Economic Costs of Undiagnosed Diabetes." Yiduo Zhang, PhD, from the Lewin Group (Falls Church, VA), and colleagues from Ingenix Pharmainformatics (Cary, NC), and Ingenix Research (Basking Ridge, NJ) healthcare use patterns of nearly 30,000 people for the 2-year period leading up to a diagnosis of diabetes and compared them with medical claims of people never diagnosed with diabetes

"Diabetes is one of the most devastating chronic diseases and costs the nation billions of dollars”. 

*Source: Texas Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008 adjusted to reflect 2010 Texas Population: 23,904,380

The Estimated Economic Cost of Diabetes in the US is $174 Billion, or $7.25 Billion for each 1 million people with Diabetes. The estimated 2010 population of Texans with diabetes is approximately 2,318,724*

The 2010 Estimated Economic Cost of Diabetes in Texas is $16.8 Billion

Approximately 6.3 million adults in the U.S. with diabetes - are unaware they have the disease, and this undiagnosed population accounts for an estimated $18 billion in health care costs each year. An estimated 597,609* Texans have undiagnosed diabetes

The 2010 Estimated Cost of Undiagnosed Diabetes in Texas is $4.3 Billion

Undiagnosed

Diagnosed$16.8 Billion

$4.3 Billion

The Economic Cost of Diabetes in Texas

Eligibility FFS and PCCM clients only

Percentage of clients with service

Diabetes Clients

Diabetes Claims

Claims per client

Reimbursement Paid

Dollars per client

Dollars per claim

20 and younger 2,354,424 0.40% 9,689 52,716 5.44 $15,164,890 $1,565.17 $287.67

21 and older 1,120,718 21.20% 238,116 2,724,096 11.44 $393,270,158 $1,651.59 $144.37

Eligibility FFS and PCCM clients only

Percentage of clients with service

Diabetes Clients

Diabetes Claims

Claims per client

Reimbursement Paid

Dollars per client

Dollars per claim

STAR under 21 1,252,550 0.30% 3,559 17,113 4.81 $3,834,545 $1,077.42 $224.07

STAR over 20 150,517 3.00% 4,457 24,586 5.52 $5,684,861 $1,275.49 $231.22

STAR Plus 68,460 11.50% 7,873 86,311 10.96 $24,812,533 $3,151.60 $287.48

Source: Texas Medicaid Managed Care Encounter Database, Institute for Child Health Policy

Data Source: FFS and PCCM data were selected from the Texas Medicaid and Health Partnership (TMHP) Ad Hoc Query Platform (AHQP) Claims Universe. Note:

Medicaid Fee-For-Service (FFS) and Patient Care Case Management (PCCM) Expenditures for Diabetes-Related Services, SFY 2006

Medicaid Managed Care Expenditures for Diabetes-Related Services, SFY 2006

Note: Diabetes-Related Services is defined as claims with any diagnosis of ICD-9-CM 250.

Texas Medicaid Diabetes-Related Services

Type 1 Diabetes

Type of encounter Number of encounters

Number of Members Estimate Paid

Inpatient 899 119 $736,415

Outpatient 1,060 425 $157,453

Physician/Supplier 16,525 1,059 $1,333,845

Total: 5,021 1,316 $2,227,713

Type 2 Diabetes

Type of encounter Number of encounters Number of Members Estimate Paid

Inpatient 108 30 $118,346

Outpatient 327 232 $71,149

Physician/Supplier 4,586 1,215 $275,841

Total 5,021 1,316 $465,335

Diabetes in Texas CHIP, SFY 2007

Source: Texas CHIP Encounter database, ICHP August 2008

Unduplicated total number of children enrolled: 554,554 Total Capitated dollar amount paid by Texas for all CHIP children: $322,054,465

 Reimbursement Paid

Total Enrolled

Diabetes Clients

Percentage of clients with service

Medicaid Fee-For-Service SYI 2006 $408,435,048 3,475,142 247,805 7.13%

Medicaid Managed Care SYI 2006 $34,331,939 1,471,527 15,889 1.08%

Texas CHIP, SFY 2007 $2,693,048 554,554 10,042 1.81%

Total Diabetes-Related Services $445,460,035 5,501,223 273,736 4.98%

2006 Texas Medicaid & CHIP(2007) Diabetes-Related Services

2006 Reimbursement Paid: $445,460,035 2006 : Enrollees with Diabetes 273,736

Source: Texas Medicaid Managed Care Encounter Database, Institute for Child Health Policy & Texas CHIP Encounter database, ICHP August 2008

Estimated 2011 Diabetes-Related Services

Year` Texas Increase

2003 8  

2006 9.7 21%

Year Texas Increase

2003 222,017  

2006 273,736 23.3%

Year Texas Increase

2003 $408,837,880  

2006 $445,460,035 9%

Texas Diabetes Rates TX Medicare Enrollees with Diabetes Reimbursement Paid

2006 Reimbursement Paid: $445,460,035 2006 : Enrollees with Diabetes 273,736

* 2011 Estimated Statistics Based on 2003 to 2006 Reimbursement Trends and Texas Projected Diabetes Cases; See Slides 3 & 4; *Source: CDC Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008, for persons who are eighteen years of age and older, and include both Type 1 and Type 2 Diabetes. Persons with diabetes include those who report that they have been told by a doctor that they have diabetes.

Estimated 2011 Reimbursement Payments: $507,401,000 Estimated 2011 Enrollees with Diabetes : 378,000

Current Source for Diabetes Supplies under Texas Medicaid

Insulin and syringes• Vendor Drug pays for insulin and insulin syringes, but only when the syringes are for insulin use

Diabetes Test Strips, Meters & Lancets• Pharmacies are encouraged to provide durable medical equipment (DME) and medical supplies to

Medicaid clients. Reimbursement for DME is different from drug claims; pharmacy providers must enter into a separate written agreement with HHSC, through the Texas Medicaid & Healthcare Partnership (TMHP).

– DMEs can currently bill Texas Medicaid for Insulin and syringes as well as Pharmaceuticals

– Currently there are no preferred Meter & Strip vendors or DME Suppliers under Texas Medicaid– Meters, Strips and Lancets are billed under CMS Procedure Codes (Test Strips 50ct - A4253) this

means that DME suppliers can ship and bill for what ever Meter, Test Strips and Lancets they choose.

Proposed Changes for Diabetes Supplies under Texas Medicaid

Proposed Changes for Diabetes Supplies under Texas Medicaid

Move Meters, Strips & Lancets from “any willing supplier” to preferred Durable Medical Equipment (DME) providers and preferred vendor product at a contracted price

Test Strips 50ct Box• Test Strip pricing to DME providers is based on their individual contracts with each vendor. Price varies

widely for each specific brand in a range around $12-$50. DMEs will provide the lowest cost product that the customer will accept because TX-Medicaid reimbursement is based on a code (A4252 - $30.74) good for any Brand 50ct box

• Large Pharmacy Benefit Providers (PBM) and DME Suppliers have contract test strip pricing with leading vendors at or below the $20 price range

• DME suppliers currently can only ship one order per month to Texas Medicaid Enrollees. In contrast both DMEs and PBMs ship a 90 day supply. This makes the shipping cost per Medicaid Enrollee 3 times the cost of their other customers. Expanding Diabetes Supplies to a 90 supply will result in lower potential pricing

100ct Lancets• DME providers typically provide low quality generic lancets that cost less than $1.00 per box. Most DME

suppliers will provide the lowest cost product because TX-Medicaid reimbursement is based on a code (A4252 -$12.08) good for any Brand 50ct box

• DME Suppliers that ship higher quality lances based on customer request have contract pricing with leading vendors at or bellow the $5 price range per 100ct box

Meters– Meters are provided at no cost as a part of most contracting with PBMs and select DMEs. TX-Medicaid

reimburses $50 per meter

Proposed Changes for Diabetes Supplies under Texas Medicaid

Considerations to effective contracting with preferred DMEs

1. DME suppliers currently can only ship one order per month to Texas Medicaid Enrollees. In contrast both DMEs and PBMs ship a 90 day supply. This makes the shipping cost per Medicaid Enrollee 3 times the cost of their other customers. Expanding to 90 supply will result in lower potential contract pricing

2. Texas Managed Medicaid providers such as Cook Children's and Texas Children's currently request specific brands of diabetes equipment. By including the Plan’s Medical Directors in the choice of preferred brands, enrollee and providers will be more satisfied with their choices of supplies

3. Utilizing fewer DME suppliers will dramatically decrease the costs associated with fraud and audits

4. Currently most of the Diabetes Supplies are being provided through companies based in Florida. Many of these companies have been charged and fined for Medicare fraud. If preferred suppliers where limited to Texas based companies, fraud would be minimized and Texas Dollars would stay in Texas

5. Texas Medicaid contracting could be made directly with DMEs based on specific price for specific product. This would eliminate the need and expense of rebates. The DMEs could negotiate price with vendors based on the contracted price

6. Most PBMs and Managed Care plans offer two preferred brand name meter and strip combos. By offering two preferred brands, enrollee and providers will have more choice in tailoring product to specific needs

7. Contracting for preferred product will assure Texans are provided higher quality product as well as dramatically reduce reimbursed costs

*New Meter Allowed One every 3 Years

**Estimated 2011 Medicaid Eligible Texans with Diabetes

Potential Savings by Lowering Diabetes Supplies Allowed Amount through Preferred DME & Vender Contracting

50ct Test A4252Lancets 100ct

A4258 Meter E0607*

Texas Medicaid Allowed Amount $30.74 $12.08 $50.00

Goal Cost per 50s; 100s, each $20.74 $8.08 $0.00

Goal Savings per box 50s; 100s, each $10.00 $4.00 $50.00

1 box per month 378,000 Enrollees** $3,780,000 $1,512,000 $126,000 Annual Total

Estimated Annual Adjudications 4,536,000 4,536,000 1,512,000 10,584,000

Potential Annual Savings $45,360,000 $18,144,000 $126,000 $63,630,000

Much of the Estimated 2011 Reimbursement Payments ($507,401,000) are spent on complications of Diabetes that are completely avoidable…

•Type 2 complications and associated costs are largely avoidable (i.e., healthy diet, regular exercise, etc.), •Obesity is a significant risk factor for the development of Type 2 diabetes.•Diabetic complications typically develop over a 20-to 30-year time frame•People with Type 1 diabetes who can maintain their blood glucose to near normal levels can cut their long term risk of serious complications in half

According to the Texas Department of Human Services Report: “Impact of Diabetes on Aging Texas Well:Costs of Medicaid Long Term Care Attributable to Diabetes” 2002 “If nothing more than what Texas is already doing is done to prevent diabetes among the young, Texas Medicaid LTC will likely spend between $1 billion and $1.6 billion in FY2030 as a result of diabetes. That represents a six- to eight-fold increase in spending over the next 30 years. This increase will account for 13% to 20% of the FY2030 Medicaid LTC budget (as compared to 9% in FY2000).”

•While there is no cure for diabetes, studies have shown that people with diabetes benefit immensely from learning about their disease and from encouragement to take responsibility for their own care. Most people with diabetes do not understand the importance of proper nutrition, exercise, and regular blood glucose monitoring.

Proposed Changes for Diabetes Education and Awareness under Texas Medicaid

“The Asheville Project”…• A program dubbed “The Asheville Project” has slashed Medical costs for participants with diabetes by 25% on average. The project began in 1997, when a disease management program was launched to improve the health of city workers with diabetes saving the city of Asheville, NC thousands of dollars in medical expenses. The program relied on specially trained pharmacists to monitor and educate participants.

•Clinical success included*…•Mean decrease in hemoglobin A1C at every follow up test for 80% of participants as compared with baseline.•The percentage of patients with optimal LDL increased from 2.4% to 21%.•HDL increased at every follow-up for 75% of participants.

Financial Success*…•Total mean dollars paid for all diagnoses decreased at each follow-up year. Most was due to a decline in emergency room, inpatient, and physician office visits.•Payers realized a decrease in total direct medical costs that ranged from $ $1,622 to $3,356 PPPY.

“The East Texas Project”…•One of the most recent and interesting studies was based in East Texas in a collaboration between Blue Cross & Blue Shield of Texas and The Texas Pharmacy Association. The Study began as a request made to me from Blue Cross on how they could help one of their Texas Employee Groups reduce increasing medical cost associated with diabetes.

•The following page highlights the “East Texas Project”…

Proposed Changes for Diabetes Education and Awareness under Texas Medicaid

* Statistics from: Cranor, CW. Outcomes of the Asheville Diabetes Care Project. Pharmacy Times. October 1998 and Horton W., Bunting B. An update on the Asheville Project. Pharmacy Times. April 1999

A Collaborative Team Approach to Disease Management Services for Rural Patients with Diabetes

• Blue Cross Blue Shield of Texas (BCBS-TX) and The Texas Pharmacy Association (TPA) ran the study based on the landmark “Ashville Project”. Where the Ashville Project validated how trained pharmacists can impact health outcomes and medical costs; the BCBS-TX/TPA Study measured both outcomes and medical expense utilizing the participants’ claim data and exact claim payments made by BCBS-TX.

• This was the first study of it’s kind that had full participation from the managed care payer for both pharmacy and medical expenses.

• The University of Houston College of Pharmacy is currently preparing publications for Q-2, 2011 for the American Pharmacists Association Journal and the Academy of Managed Care Pharmacy Journal of Managed Care Pharmacy Journal.

• Median charge per medical claim decreased by 11.0% between 2007 and 2008 ($73.00 to $65.00)

• Median total charge per patient showed little change between 2007 and 2008 ($5553.20 to $5523.13)

• Median charge per medical claim per patient decreased by 3.1 % between 2007 and 2008 ($120.64 to $116.89)

• Median charge per medical claim decreased by 2.7% between 2007 and 2008 ($82.25 to $80.00)

• Median total charge per patient increased by 137% between 2007 and 2008 ($3096.14 to$7362.79)

• Median charge per medical claim per patient increased by 25.3% between 2007 and 2008 ($165.49 to $204.42)

Study Results for Medical Services Utilization and Charges from 2007-2009*

Case Group Control Group

* As reported in the “Final Report” of A Collaborative Team Approach to Disease Management Services for Rural Patients with Diabetes

•Currently Medicaid/CHIP Contract Management manages over 4,000 pharmacy contracts including reviewing applications, assigning fees, recommending and imposing sanctions, and resolving compliance issues.Many of these pharmacies could be utilized for providing diabetes education and lifestyle management.

•I propose Texas Medicaid/Chip work directly with the Texas Pharmacy Association, the Texas Board of Pharmacy, Texas Federation of Drug Stores, and major chain drug companies in order to begin a discussion around the potential role of Texas Pharmacists in providing diabetes education and lifestyle management to Medicare/CHIP Enrollees.

Based on studies and estimated 2011 reimbursements, such a plan could save Texas at least $127 Million Dollars in 2011 Reimbursements• By increasing the number of pharmacies that provide Texas Medicaid blood glucose testing products would help insure enrollees have access to pharmacy based education…

•Currently Pharmacies enrolled with the Texas Vendor Drug Program (VDP) are eligible to enroll with TMHP as CCP providers. This enrollment allows pharmacies to bill TMHP for medically necessary drugs, equipment, or supplies such as blood glucose testing supplies not covered by Medicaid VDP. Currently very few pharmacies and no major chain drug stores enroll with TMHP because the adjudication process does not work with their systems

•House Bill-1487 called for the “ALIGNMENT OF MEDICAID DIABETIC EQUIPMENT ANDSUPPLIES WRITTEN ORDER PROCEDURES WITH MEDICARE DIABETIC EQUIPMENT AND SUPPLIES WRITTEN ORDER PROCEDURES.” No changes have been communicated to Vendor Drug managed pharmacies

•Most Pharmacies bill Medicare for strips and meters electronically through a Medicare Processor. The processors file with CMS. The test strip vendors rebate the pharmacies based on the Medicare Processors data. If Medicaid Diabetic Equipment adjudication is aligned with Medicare Procedures, most pharmacies could bill TMHP for medically necessary drugs, equipment, or supplies such as blood glucose testing supplies

Proposed Changes for Diabetes Education and Awareness under Texas Medicaid