Supplier Billing for Diabetes Test Strips and Inappropriate Supplier Activities in Competitive Bidding Areas

WHY WE DID THIS STUDY

This memorandum report responds to a written request from CMS to determine whether an increase in claims for non-mail order diabetes test strips (DTS) between 2010 and 2011 may be attributed to abusive supplier practices. These practices include (1) improperly billing mail order items as non-mail order and (2) inappropriately waiving beneficiaries' out-of-pocket expenses (i.e., copayments). Under Round 1 of CMS's Competitive Bidding Program, implemented in January 2011, non-mail order DTS in Competitive Bidding Areas (CBAs) are reimbursed at a rate more than double that of mail order DTS. This price difference provides a financial incentive for suppliers to bill for non-mail order rather than mail order DTS. In contrast, this price difference provides a financial disincentive for beneficiaries because they are responsible for a 20-percent Medicare copayment, and the higher price of non-mail order DTS thus makes the copayment higher. The Senate Special Committee on Aging also expressed written concerns to OIG regarding the price difference between mail order and non-mail order DTS.

HOW WE DID THIS STUDY

In accordance with CMS's request, we determined the extent to which (1) claims in CBAs for the more expensive, non-mail order DTS increased between 2010 and 2011; (2) suppliers improperly billed Medicare for the more expensive, non-mail order DTS in 2011; (3) beneficiaries changed from mail order to non-mail order DTS between 2010 and 2011 because suppliers waived their copayments; and (4) suppliers conducted activities that we determined to be inappropriate (i.e., routinely waiving copayments, sending unsolicited DTS) in 2010 or 2011. We reviewed 2010 and 2011 Medicare claims data and conducted telephone interviews with 211 beneficiaries.

WHAT WE FOUND

Claims in CBAs for the more expensive, non-mail order DTS increased by 33 percent from 2010 to 2011, while claims for the less expensive, mail order DTS decreased by 71 percent. Further, for 20 percent of beneficiaries in our review, suppliers improperly billed Medicare for the more expensive, non-mail order DTS in 2011, but beneficiaries reported having instead received the less expensive, mail order DTS. This improper supplier billing contributed to the increase in claims for non-mail order DTS between 2010 and 2011. Of the beneficiaries in our review who reported changing from mail order to non-mail order DTS between 2010 and 2011, none reported suppliers' waiver of copayments as a reason for their change. Therefore, suppliers' inappropriate waiver of beneficiaries' copayments did not appear to contribute to the increase in non-mail order DTS claims between 2010 and 2011. However, 23 percent of beneficiaries in our review reported supplier activities (i.e., routinely waiving copayments, sending unsolicited DTS) that we determined to be inappropriate.

This report does not contain recommendations.