State Medicaid Agencies Can Significantly Reduce Medicaid Costs for Diabetic Test Strips

During recent Medicaid audits, we determined that home blood-glucose test strips (test strips) are available to the Centers for Medicare & Medicaid Services (CMS) and certain State Medicaid agencies at a net cost well below that available to other State Medicaid agencies. We conducted audits in Illinois, Indiana, New Jersey, New York, and Ohio to determine whether opportunities exist for State Medicaid programs to achieve savings for test strips.

We found that two of the five State Medicaid agencies had saved $17.9 million through the use of rebates, and four of the five State Medicaid agencies could save an additional $29.7 million through the use of rebates or competitive bidding on the purchase of test strips, for a total savings of $47.6 million. We also identified $8.3 million in additional savings in four of the five States had they obtained pricing comparable to pricing under Medicare's national mail-order competition for diabetic supplies.

Through the use of manufacturer rebate programs, two State Medicaid programs reduced the net cost of test strips by approximately 51 percent. The State Medicaid agencies' use of manufacturer rebates led to reduced costs that benefited both the States and the Federal Government while maintaining access to test strips for Medicaid beneficiaries.

We found that Medicaid provider reimbursement rates for test strips varied significantly among the States that we reviewed. We determined that opportunities exist for these States to lower provider reimbursement rates, resulting in cost savings for the State in addition to the savings that can be achieved through a manufacturer rebate program. One State Medicaid program initiated a competitive bidding program after the completion of our audit.

We recommended that CMS work with State Medicaid agencies to determine whether the use of manufacturer rebates and lower provider reimbursement rates could achieve net savings for the purchase of test strips. CMS concurred with our recommendation.