State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies

WHY WE DID THIS STUDY

In 2012, fee-for-service State Medicaid programs reported spending $266 million on nine specific types of disposable incontinence supplies (e.g., diapers). Many State legislatures have passed legislation directing States to seek opportunities to reduce the costs of health care goods-such as incontinence supplies-and services. Since 2009, OIG has identified ensuring the integrity of Federal health care program payment methodologies as a top management challenge for the Department of Health and Human Services. In addition, there have been a number of fraud cases involving disposable incontinence supplies.

HOW WE DID THIS STUDY

From each State Medicaid program (50 States and the District of Columbia), we collected 2012 data on the claim volumes and fee-schedule reimbursement rates for nine Healthcare Common Procedure Coding System codes for commonly used disposable incontinence supplies. We conducted a survey of each State Medicaid program to determine how many States implemented or attempted to implement cost control measures, such as competitive bidding, for such supplies. We calculated the amount that Medicaid programs would save if the median competitive bidding rate were used. For the five States that had implemented competitive bidding programs, we conducted structured telephone interviews with State Medicaid program staff to obtain further information about these programs.

WHAT WE FOUND

All State Medicaid programs implemented cost-control measures-such as quantity limitations or reductions in fee-schedule amounts-for incontinence supplies. Five State Medicaid programs implemented competitive bidding programs. These programs reported savings of up to 50 percent. If State Medicaid programs had paid suppliers at the median competitive bidding rate, they could have paid 23 percent less, saving $62 million. Other positive outcomes resulted from competitive bidding, such as increased beneficiary access to supplies, increased product quality, and State Medicaid program control of providing supplies. However, States reported encountering initial challenges with their competitive bidding programs, and six States attempted to establish competitive bidding but did not fully implement it.

WHAT WE RECOMMEND

We recommend that CMS encourage State Medicaid programs to seek further cost savings for disposable incontinence supplies. CMS concurred with our recommendation.