Illinois Significantly Reduced Medicaid Costs for Home Blood-Glucose Test Strips But Could Achieve Additional Reductions

Through its manufacturer rebate program, the Illinois Medicaid program reduced the net cost of test strips purchased during State fiscal year (SFY) 2011. The net cost of test strips obtained through Illinois' manufacturer rebate program was significantly lower than the Illinois Medicaid average reimbursement rate for test strips. The State agency's use of manufacturer rebates led to reduced costs that provided mutual benefits to the State and Federal Governments, while maintaining access to test strips for Illinois Medicaid beneficiaries.

However, we determined that the Illinois average Medicaid provider reimbursement rate for test strips was significantly greater than the corresponding Illinois Medicare rate. The higher provider reimbursement rates in Illinois may have limited the amount of cost-savings the State could achieve with its rebate program. The manufacturer rebate, which is not based on the Illinois reimbursement rate for test strips, offsets only a portion of the significantly greater provider reimbursement rate. The net Medicaid payment rates Illinois obtained through manufacturer rebates were significantly greater than the corresponding Indiana Medicaid rate. By reducing its provider reimbursement rates, Illinois could further lower the net cost of test strips. If it had used this approach, which reflects the Indiana Medicaid program's experience, the Illinois Medicaid program could have achieved additional savings of approximately $8.5 million for SFY 2011.

We recommended that the State agency lower the net cost of test strips through changes to provider reimbursement rates, which could have resulted in an additional $8.5 million in savings in SFY 2011. The State agency concurred with our recommendation.