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Audit (A-02-12-01010)

09-05-2013
New Jersey Medicaid Program Could Achieve Savings by Reducing Home Blood-Glucose Test Strip Prices

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Summary

The New Jersey Medicaid program could have achieved savings of approximately $1.8 million to $2.7 million during the period January 1, 2011, through December 31, 2011, by reducing home blood-glucose test strip (test strip) reimbursement rates to retail rates or by establishing a competitive bidding program for test strips. Specifically, we determined that retail prices for 50-unit packages of test strips were lower than the Department of Human Services' (State agency) average Medicaid fee-for-service reimbursement rate. We also determined that the Medicare reimbursement rates for mail-order test strips obtained through competitive bids were lower than the State agency's average Medicaid fee-for-service reimbursement rate. Decreasing the Medicaid fee-for-service reimbursement rate to average retail price levels or establishing a competitive bidding mail-order program similar to the Medicare program could result in a 46- to 68-percent reduction in the price of test strips paid under the New Jersey Medicaid fee-for-service program.

Additionally, the average reimbursement rate for a 50-unit package of test strips paid by the 4 Medicaid managed care organizations (MCOs) in New Jersey was significantly higher than both retail test strip prices and the Medicare reimbursement rates obtained through competitive bids. Specifically, during the period January 1, 2011, through December 31, 2011, total MCO reimbursement for test strips was $3.1 million and $4.5 million greater than retail prices and Medicare payment rates, respectively. Decreasing MCO reimbursement rates for test strips to the average retail price or establishing a competitive bidding mail-order program similar to the Medicare program could result in a 49- to 70-percent reduction in the price of test strips paid by the four New Jersey Medicaid MCOs and additional savings to the New Jersey Medicaid program.

We recommended that the State agency consider (1) reducing the Medicaid fee-for-service reimbursement rate for test strips to be comparable to the average retail price or establishing a competitive bidding program similar to Medicare for the purchase of test strips, which could have resulted in savings to the New Jersey Medicaid fee-for-service program of $1.8 million to $2.7 million during the period January 1, 2011, to December 31, 2011, and (2) working with the four Medicaid MCOs to adjust payment rates for test strips to the average retail price or to Medicare competitive payment rates, which could have reduced MCO test strip prices by a total of $3.1 million to $4.5 million during the period January 1, 2011, to December 31, 2011. The State agency disagreed with our recommendations.

Copies can also be obtained by contacting the Office of Public Affairs at Public.Affairs@oig.hhs.gov.

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