Health Care Financing Administration [BPD778PN]

RIN 0938AG28

Medicare Program; Special Payment Limits for Home Blood Glucose Monitors

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed notice.

SUMMARY: This notice would establish special payment limits for standard home
blood glucose monitors, identified as code E0607 of the HCFA Common Procedure
Coding System (HCPCS). This proposed notice is intended to prevent excessive
payment for these items. Currently, payment under the Medicare program for
home blood glucose monitors and other items of durable medical equipment (DME)
is equal to 80 percent of the lesser of the actual charge for the item or the
fee schedule amount for the item. This notice proposes that payment for
standard home blood glucose monitors be equal to 80 percent of the lesser of
the actual charge or a special payment limit.

DATES: Comments will be considered if we receive them at the appropriate
address, as provided below, by 5 p.m. on March 7, 1994.

ADDRESSES: Mail written comments (1 original and 3 copies) to the following
address:

Health Care Financing Administration, Department of Health and Human Services,
Attention: BPD778PN, P.O. Box 26688, Baltimore, MD 21207

If you prefer, you may deliver your written comments (1 original and 3 copies)
to one of the following addresses:

Room 309G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or

Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, MD
21207.

Because of staffing and resource limitations, we cannot accept comments by
facsimile (FAX) transmission. In commenting, please refer to file code
BPD778PN. Comments received timely will be available for public inspection
as they are received, generally beginning approximately 3 weeks after
publication of a document, in room 309G of the Department's offices at 200
Independence Avenue, SW., Washington, DC, on Monday through Friday of each
week from 8:30 a.m. to 5 p.m. (phone: (202) 2457890).

FOR FURTHER INFORMATION CONTACT: Joel Kaiser, (410) 9664499.

SUPPLEMENTARY INFORMATION:

I. Background

A. Special Reasonable Charge Limits

Payment for DME furnished under Part B of the Medicare program (Supplementary
Medical Insurance) is made through contractors known as carriers. Before
January 1, 1989, payment for DME was made on a reasonable charge basis. The
methodology used by the carriers to establish reasonable charges is set forth
in sections 1833 and 1842(b) of the Social Security Act (the Act) and in 42
CFR part 405, subpart E. Reasonable charge determinations are generally based
on customary and prevailing charges derived from historic charge data. The
reasonable charge for an item of DME was generally set at the lowest of the
following factors:

 The supplier's actual charge for the item.

 The supplier's customary charge.

 The prevailing charge in the locality for the item. (The prevailing charge
may not exceed the 75th percentile of the customary charges of suppliers in
the locality.)

 The inflation indexed charge (IIC). The IIC is defined in  405.509(a) as the
lowest of the fee screens used to determine reasonable charges for services,
supplies, and equipment paid on a reasonable charge basis (excluding
physicians' services) that is in effect on December 31 of the previous fee
screen year, updated by the inflation adjustment factor.

Section 1842(b)(3) of the Act requires that all payments under Part B of the
Medicare program must be reasonable. Paragraphs (8) and (9) of section 1842(b)
of the Act provide that we may establish a special reasonable charge limit for
a category of service if, after consultation with representatives of affected
parties, we determine that the standard rules for calculating reasonable
charges result in grossly deficient or excessive charges.

Applicable regulations are located at  405.502(g). Section 405.502(g)
requires that we consider the available information that is relevant to the
category of service and establish reasonable charge limits that are realistic
and equitable. The limit on the reasonable charge is an upper limit to correct
a grossly excessive charge or a lower limit to correct a grossly deficient
charge. The limit is either a specific dollar amount or is based on a special
method to be used in determining the reasonable charge.

Section 405.502(g)(1) provides the following examples of circumstances that
may result in grossly deficient or excessive charges:

 The marketplace is not competitive.

      Medicare and Medicaid are the sole or primary source of payment for a
service.

 The charges involve the use of new technology for which an extensive charge
history does not exist.

 The charges do not reflect changing technology, increased facility with that
technology, or changes in acquisition, production, or supplier costs.

 The prevailing charges for a service in a particular locality are
substantially higher or lower than prevailing charges in other comparable
localities, taking into account the relative costs of furnishing the services
in the different localities.

 Charges are grossly lower than or exceed acquisition or production costs.

 There have been increases in charges for a service that cannot be explained
by inflation or technology.

 The prevailing charges for a service are substantially higher or lower than
the payments made for the service by other purchasers in the same locality.

Section 405.502(g)(3) specifies that we announce payment limits in the Federal
Register. Specifically, we publish in the Federal Register our intention to
propose limits and allow 60 days for receipt of public comments on the
proposal. After we have considered all timely comments, we publish in the
Federal Register a final notice announcing the special payment limits and our
analyses and responses to the comments. Section 405.502(g)(3) also provides
that the proposed and final notices must set forth the criteria and
circumstances, if any, under which a carrier may grant an exception to the
limit(s).

B. DME Fee Schedules

Section 4062 of the Omnibus Budget Reconciliation Act of 1987 (OBRA '87)
(Public Law 100203), which added section 1834(a) to the Act, provides for a
fee schedule payment methodology for DME furnished on or after January 1,
1989. (This fee schedule payment methodology is set forth in 42 CFR part 414,
subpart D.) Sections 1834(a)(1) (A) and (B) of the Act provide that Medicare
payment for DME is equal to 80 percent of the lesser of the actual charge for
the item or the fee schedule amount for the item. Section 1834(a) of the Act
classifies DME into the following payment categories:

 Inexpensive or other routinely purchased DME.

 Items requiring frequent and substantial servicing.

 Customized items.

 Oxygen and oxygen equipment.

 Other items of DME (capped rental items).

There is a separate methodology for determining the fee schedule payment
amount for each category of DME. The fee schedules are adjusted annually by a
covered item update factor. The covered item update factor is generally equal
to the change in the Consumer Price Index for all Urban Consumers (CPIU) for
the 12-month period ending June 30 of the preceding year.

Section 1834(a)(10)(B) provides that we may apply the special payment limits
authority of paragraphs (8) and (9) of section 1842(b) to covered items of DME
and suppliers of these items and payments under section 1834(a) in the same
manner as these provisions apply to physician's services and physicians and
reasonable charges under section 1842(b).

C. Payment for Home Blood Glucose Monitors (Code E0607)

Standard home blood glucose monitors allow individuals to measure their blood
glucose and, then, alter their diets or insulin dosages to ensure that they
are maintaining an adequate blood glucose level. Home blood glucose monitors
are covered by the Medicare program as DME and are classified under the
inexpensive and other routinely purchased DME payment category defined in
section 1834(a)(2) of the Act. Section 1834(a)(2) specifies that inexpensive
and other routinely purchased DME are those items of DME that have a purchase
price that does not exceed $150 or are acquired at least 75 percent of the
time by purchase. We determined that home blood glucose monitors belong in
this category based on a review of data that show that these monitors are
acquired at least 75 percent of the time by purchase.

Section 1834(a)(2) requires that payment for items falling within this
category be made on a purchase or rental basis and that local purchase and
rental fee schedule amounts be calculated for each item. Section 414.220(c)(1)
provides for the calculation of purchase fee schedules for both new and used
DME within this category. The fee schedule amounts for purchased new,
purchased used, and rental DME within this category are based on the average
reasonable charges for purchased new, purchased used, and rental DME,
respectively, from the base year period of July 1, 1986 through June 30, 1987.

      The current 1993 fee schedule amounts for code E0607 accurately reflect
the average reasonable charges for home blood glucose monitors in 1986,
adjusted by 1.7 percent (the percentage increase in the CPIU for the 6-month
period ending with December 1987) and by the cumulative covered item update
factor. The average 1993 fee schedule amount for purchased new home blood
glucose monitors, excluding the fee schedule amounts for the Virgin Islands,
Alaska, Hawaii, and Puerto Rico, is $178.73. However, as we explain below, due
to manufacturers' widespread practice of issuing consumer rebates, the fee
schedule amounts substantially exceed the effective purchase amount (the list
purchase amount less any rebate) paid by the general public in all localities.

We have reviewed pricing and rebate information available for the years 1986
through 1993 to become familiar with the home blood glucose monitor market.
Our pricing and rebate sources include: mail order catalogs (such as Bruce
Medical Supply catalog, St. Louis Medical Supply, and Institutional Products),
advertisements listed in newspapers and periodicals (such as Drug Topics and
Shopper's Guide), and pharmacy and other retail store fliers. For the purposes
of this analysis, we focused on home blood glucose monitor pricing and
national rebate programs listed in the Winter 1993 edition of the Bruce
Medical Supply catalog (Vol. 15, No. 1), but the pricing and rebate
information found in the Bruce catalog is consistent with the pricing and
rebate information available in all the other sources we examined.

In addition, in our experience, the Bruce catalog listed the largest number of
home blood glucose monitors made by the largest number of home blood glucose
monitor manufacturers, and reflected the national rebate programs offered by
these manufacturers. Six different brands of home blood glucose monitors,
manufactured by five different organizations, can be purchased from the Bruce
catalog from any location in the United States, Puerto Rico, and the United
States Virgin Islands and are covered under Medicare. The monitors listed are:
Accu-Chek III, manufactured by Boehringer Mannheim; Checkmate, manufactured by
Cascade Medical; ExacTech Companion and ExacTech Pen, manufactured by
MediSence; Glucometer 3, manufactured by Miles, Inc.; One Touch II,
manufactured by Lifescan; and Tracer II, manufactured by Boehringer Mannheim.
We estimate that the six monitors listed in the Bruce catalog account for
approximately 90 percent of the market. This estimate is based on marketing
information presented in an article that appeared in the Wall Street Journal
on November 12, 1992 (Marketing and Media section, B1).

We are using the Bruce catalog pricing and rebate information because it is a
convenient single reference. We believe the catalog is indicative of market
pricing for home blood glucose monitors. In addition, the catalog lists the
national rebate programs offered by the manufacturers of the monitors. By
choosing the Bruce catalog as the source of data for proposing payment limits,
we are not recommending that future purchases of home blood glucose monitors
by Medicare beneficiaries be made through the Bruce catalog. We are confident
that comparable net prices are available in all localities from the various
other mail order or retail outlets.

During the fee schedule base year period (July 1, 1986 through June 30, 1987),
retail prices for home blood glucose monitors generally exceeded $150. Since
then, several lower priced models have appeared on the market while the older,
higher priced models have been phased out. The growth in the home blood
glucose monitor market and advances in the technology of producing these
monitors have caused the market value of the home blood glucose monitor to
decline steadily, so that now this item is readily available at prices below
$70. In addition, manufacturers have begun the widespread practice of issuing
consumer rebates to promote their products. Mail-in manufacturers' rebates
ranging from $20 to $75 have been available over the past several years. The
Medicare program does not receive the benefit of many of these rebates
because, although suppliers bill for the price of the equipment, the rebates
are sent to the beneficiary.

The average list price of the six monitors in the Bruce catalog is $65.44.
Manufacturer rebates, ranging from $30 to $50, are available for four of these
monitors. A fifth monitor, the Checkmate, is listed at a price of $61.90, but
can be obtained through the catalog free of charge with the purchase of two
boxes of Checkmate test strips, supplies that are essential for the effective
use of the Checkmate monitoring system. New home blood glucose monitors are
now available to the general public at a net cost that is well below the fee
schedule amounts established for code E0607.

Our findings are supported by the Office of the Inspector General's (OIG)
report "Durable Medical Equipment Review of Medicare Payments for Home Blood
Glucose Monitors'' (A099200034) issued in December of 1992. In this report,
the OIG states that excessive Medicare payments have been made for home blood
glucose monitors because claims were not adjusted to reflect manufacturers'
rebates. The OIG reviewed a sample of 80 Medicare claims for monitors
processed by 2 carriers. From this sample, the OIG identified 50 claims for
which rebates were available at the time the monitors were purchased. The OIG
found that Medicare payment for only 5 of these 50 claims were reduced by the
amount of the rebate. The OIG concluded that the fee schedule amounts
established for code E0607 based on pre-1987 historic charges are excessive.

D. Supplier Consultation

Sections 1834(a)(10)(B) and 1842(b)(9)(A)(i) of the Act require that we
consult with representatives of the suppliers likely to be affected by any
change in payment before making a determination that a fee schedule amount(s)
is not inherently reasonable by reason of its grossly excessive or deficient
amount. On June 15, 1993, we met with representatives of suppliers of home
blood glucose monitors (hereinafter referred to as supplier representatives)
to discuss issues relating to Medicare payment for these devices. The
following is a synopsis of the comments and concerns of the supplier
representatives as expressed at this meeting.

The supplier representatives were primarily concerned about the use of
manufacturer rebate information in determining appropriate Medicare payment
amounts for home blood glucose monitors. They maintained that the rebate
programs are purely a marketing tool used by the manufacturers to promote the
sale of their monitors, that the rebates do not relate in any way to the
"market price'' of the monitors, and that the rebate programs are not
permanent and, therefore, should not be used as a basis for establishing
payment amounts.

Currently, if a manufacturer's rebate is included in the charge listed on a
claim submitted for reimbursement to Medicare, that rebate is to be clearly
and specifically identified and is to be annotated as not reimbursable under
Medicare. Payment is based on the lower of the actual charge for the equipment
(the submitted charge less the rebate amount) or the fee schedule amount.
However, as noted in the OIG report discussed above, in a majority of cases,
the rebates are not reported on the claims submitted to Medicare, resulting in
Medicare overpayments.

The Medicare payment amounts for home blood glucose monitors should not exceed
the amounts paid by the general public for these devices. The price of a home
blood glucose monitor less any available rebate amount represents the actual
cost to the consumer for the device and is an appropriate basis for
establishing Medicare payment amounts for these devices.

In the case of home blood glucose monitors, manufacturer rebates are
widespread and have been available for several years. The OIG reported that
manufacturer rebates for home blood glucose monitors generally range from
about $30 to $75 and that the duration of the rebate offer is continually
extended, often lasting for more than 1 year or until a new model is
introduced. Given the facts underlying the pricing of these monitors, the
retail prices of home blood glucose monitors less the available rebate amounts
are reasonable measures of the market value of these devices.

The supplier representatives maintained that some rebate programs are not
available in some areas of the United States. However, the rebates listed in
the Bruce Medical Supply catalog are available to all Medicare beneficiaries
living in the continental United States, Alaska, Hawaii, Puerto Rico, and the
United States Virgin Islands.

The supplier representatives stated that we should consider establishing
inherent reasonableness limits for blood glucose test strips, identified as
code A4253 of the HCPCS. Medicare payment for these supplies is made on a
reasonable charge basis. The Medicare carriers, therefore, have the authority
to establish inherent reasonableness limits for code A4253. We are aware of
several carriers that have established inherent reasonableness limits for this
code.

II. Provisions of This Proposed Notice

Based on our own experience and the work of OIG, and after consulting with
representatives of suppliers of home blood glucose monitors, we have
determined that the fee schedule amounts for code E0607 are grossly excessive
and are not inherently reasonable. In accordance with section 1842(b)(8) of
the Act, we are proposing to replace the use of a fee schedule payment with
special payment limits for code E0607. These special payment limits would not
apply to home blood glucose monitors with special features (HCPCS code E0609).

A. Special Payment Limits for Code E0607

1. New Home Blood Glucose Monitors

      For purchased new home blood glucose monitors furnished to Medicare
beneficiaries, we propose the following special payment limits:

Initial Year Special Payment Limits

                            Continental U.S	$57

             Alaska, Hawaii, Puerto Rico and Virgin Islands	$65

These proposed limits are based on pricing and manufacturers' rebates
contained in the Winter 1993 edition of the Bruce Medical Supply catalog. We
based the proposed limits for the continental U.S. on the median net cost,
rounded to the nearest dollar, of five of the six monitors listed in the
catalog. We omitted the Checkmate monitor because this monitor is relatively
new to the market and has little market history. We determined the cost for
each monitor to be equal to the Bruce Medical Supply list price decreased by
the manufacturer's mail-in rebate (if applicable) and increased by appropriate
shipping and handling charges effective December 1992. After making the
adjustments for rebates and shipping and handling charges, we are proposing a
limit of $57 which exceeds the final cost for four of the six monitors listed
in the catalog. We permitted an additional shipping charge of $8 for monitors
that are purchased in Alaska, Hawaii, Puerto Rico, and the U.S. Virgin
Islands. In addition, our review of current pricing and rebate information
shows that several brands of new home blood glucose monitors can be widely
purchased at prices below the proposed limits.

The information we used to calculate the proposed limits is presented below.

c6,L2,i1,s10,6,7,5,5,5

Bruce Medical Supply (Winter 1993)

I96[Pricing for Home Blood Glucose Monitors] [col head 1] Monitor  [col head
1] List price  [col head 1] Rebate  [col head 1] Basic cost (1)  [col head 1]
Shipping & handling (2)  [col head 1] Final cost (1+2)

Checkmate 	$61.90 	1 $61.90 	$0.00 	$6.95 	$6.95

Tracer II 	42.95 	30.00 	12.95 	5.95 	18.90

Glucometer 3 	42.95 	30.00 	12.95 	5.95 	18.90

Accu-Chek III 	79.95 	30.00 	49.95 	6.95 	56.90

ExacTech 	54.95 	00.00 	54.95 	5.95 	60.90

One Touch II 	109.95 	50.00 	59.95 	8.95 	68.90

Median of the final cost $57

1 The Checkmate monitor can be obtained free of charge with the purchase of
two boxes of Checkmate test strips.

The final median cost of the monitors listed in the Bruce catalog, excluding
the Checkmate monitor, including shipping and handling, and rounded to the
nearest dollar is $57. We propose that this amount be established as the
special payment limit for new home blood glucose monitors furnished within the
continental United States. The final median cost for these monitors, if
furnished in Alaska, Hawaii, Puerto Rico, or the United States Virgin Islands,
including shipping and handling, and rounded to the nearest dollar is $65. We
propose that this amount be established as the special payment limit for new
home blood glucose monitors furnished outside the continental United States.

We recognize that shipping and handling costs are unique to mail-order outlets
and are not generally experienced by retail outlets; however, we have chosen
to include these shipping and handling costs, without regard to the type of
supplier, as a proxy for similar costs such as transportation and overhead
that might be incurred by retail stores. The average shipping and handling
cost per monitor in the continental U.S. is approximately $7, an amount that
we believe sufficiently reflects expenses incurred by retail stores that
supply home blood glucose monitors. The additional shipping allowance of $8 is
intended to reflect additional costs of shipping outside the continental U.S.

2. Purchased Used Home Blood Glucose Monitors

Historically, Medicare allowed payment amounts for the purchase of used DME
have been set at approximately 75 percent of the corresponding allowed payment
amounts for the purchase of new DME. Based on this ongoing policy, for
purchased used home blood glucose monitors, the special payment limits would
be equal to 75 percent of the special payment limits for purchased new
monitors. If the special payment limit for a purchased new home blood glucose
monitor is $57, the special payment limit for the purchased used monitor would
be $42.75.

3. Rented Home Blood Glucose Monitors

Historically, Medicare-allowed payment amounts for the rental of DME have been
set at approximately 10 percent of the corresponding allowed payment amounts
for the purchase of new DME. Based on this ongoing policy, for rented home
blood glucose monitors, the special payment limits would be equal to 10
percent of the special payment limits for purchased new monitors. If the
special payment limit for a purchased new home blood glucose monitor is $57,
the special payment limit for a rented monitor would be $5.70 each month. The
total payment for a rented monitor would not be allowed to exceed the lower of
the actual charge or the fee for the purchase of the monitor.

B. Applicability

The initial special payment limits we propose would apply to standard home
blood glucose monitors furnished on or after the effective date of the
published final notice and before January 1, 1994. For standard home blood
glucose monitors furnished in calendar year 1994, the special payment limits
would be equal to the initial special payment limits increased by the 1994
covered item update factor (the factor used to update other items of DME). The
covered item update for 1994, and each subsequent year, is defined in section
1834(a)(14)(B) of the Act as the percentage increase in the CPIU for the
12-month period ending with June of the previous year. For each calendar year
after 1994, the special payment limits would be equal to the special payment
limits for the preceding calendar year increased by the covered item update
for the calendar year to which the limits would apply.

C. Payment for Home Blood Glucose Monitors

We propose that payment for home blood glucose monitors be equal to 80 percent
of the lesser of the actual charge for the monitor or the appropriate special
payment limit, as described in section A above.

III. Regulatory Impact Statement

A. Executive Order 12291

Executive Order 12291 (E.O. 12291) requires us to prepare and publish a
regulatory impact analysis for any notice that meets one of the E.O. 12291
criteria for a "major rule''; that is, that would be likely to result in

 An annual effect on the economy of $100 million or more;

 A major increase in cost or prices for consumers, individual industries,
Federal, State, or local government agencies, or geographic regions; or

 Significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based enterprises
to compete with foreign-based enterprises in domestic or export markets.

This proposed notice would reduce unnecessary Medicare program expenditures
for standard home blood glucose monitors. Currently, payment under the
Medicare program for home glucose monitors is equal to 80 percent of the
lesser of the actual charge for the item or the fee schedule amount for the
item. Under this proposed notice, payment would be equal to 80 percent of the
lesser of the actual charge or the appropriate special payment limit proposed
by this notice.

We are proposing special payment limits for purchased new home blood glucose
monitors for Medicare beneficiaries of $57 if the monitor is furnished within
the continental United States and $65 if furnished in Alaska, Hawaii, Puerto
Rico, or the Virgin Islands.

We estimate that imposing special payment limits for purchased new home blood
glucose monitors would produce savings of $5 million annually, or $25 million
from FY 1994 through FY 1998.

This notice would not meet the $100 million criterion nor would it meet the
other E.O. 12291 criteria. Therefore, this notice is not a major rule under
E.O. 12291, and an initial regulatory impact analysis is not required.

B. Regulatory Flexibility Act

We generally prepare a regulatory flexibility analysis that is consistent with
the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 through 612) unless the
Secretary certifies that a notice would not have a significant economic impact
on a substantial number of small entities. For purposes of the RFA, all
suppliers and manufacturers of home blood glucose monitors are considered to
be small entities.

In addition, section 1102(b) of the Act requires the Secretary to prepare a
regulatory impact analysis if a notice may have a significant impact on the
operations of a substantial number of small rural hospitals. This analysis
must conform to the provisions of section 603 of the RFA. For purposes of
section 1102(b) of the Act, we define a small rural hospital as a hospital
that is located outside of a Metropolitan Statistical Area and has fewer than
50 beds.

      In determining whether to adjust payment rates for standard home blood
glucose monitors, we considered the potential impacts on quality, access, and
beneficiary liability of the adjustment, including the likely effects on
assignment rates and participation rates of suppliers (as required by section
1842(b)(8)(C) of the Act). These considerations are addressed below in this
impact analysis.

This notice would affect suppliers of standard home blood glucose monitors.
Their Medicare payments could be reduced by the amount of the estimated
savings. Suppliers can choose to accept assignment, which means they agree to
accept Medicare's approved amount as payment in full. It is possible that, as
a consequence of our reducing payments for code E0607, the number of suppliers
accepting assignment of a beneficiary's claim for Medicare payment for this
code may decrease if suppliers choose instead to charge beneficiaries the full
difference between the amount charged and the lower Medicare payment. Also,
the number of suppliers who elect to become "participating suppliers'' may
decrease as a result of reduced payments for code E0607. Under the Medicare
participation program, a supplier that decides to become a "participating
supplier'' must agree to accept assignment for all covered services furnished
to Medicare beneficiaries. Participating suppliers benefit by being listed in
the Medicare Participating Physician/Supplier Directories, known as Medpards,
which are compiled by the Medicare carriers and furnished to various senior
citizen groups. A Medicare beneficiary can obtain the Medpard for his or her
State from the Medicare carrier.

Suppliers who do not accept assignment and charge more than the Medicare
approved amount can collect the balance, that is, the actual charge minus
Medicare payment, from the beneficiary. Therefore, beneficiaries who receive
services from suppliers who do not accept assignment are exposed to greater
financial liability than those who receive services from a supplier taking
assignment. As a result, Medicare beneficiaries may choose to deal with
participating suppliers or purchase less expensive home blood glucose monitors
in order to reduce their financial liability.

Manufacturers of more expensive home blood glucose monitors may be affected
if, as a result of this notice, suppliers choose to provide less expensive
monitors or Medicare beneficiaries decide to use less expensive monitors. We
expect that this notice would have minimal affects on the quality of monitors
furnished to beneficiaries or on beneficiary access to quality monitors. As we
demonstrated above, four out of six home blood glucose monitors listed in the
Bruce Medical Supply catalog can be purchased from anywhere in the continental
United States for less than $57.

Though the estimated decrease in the allowed limit from $178.73 to $57 for
monitors purchased in the continental U.S. appears large, the net decrease is
not large, given the size and prevalence of the rebates manufacturers have
been refunding to beneficiaries. Four of five manufacturers are giving rebates
ranging from 37 percent to 70 percent of the purchase price. In addition, the
glucose test strips used with the monitors are specifically manufactured to be
used with a specific brand of monitor. The test strips frequently cost more
than $.50 each and a beneficiary may use 4 or more each day. Therefore, once
the beneficiary obtains a home blood glucose monitor, Medicare could pay an
additional $60 each month the beneficiary uses the medically necessary
monitor. Apparently, the income generated from the ongoing sale of the test
strips far exceeds the income generated from the sale of the monitors. A
manufacturer has an enormous incentive to promote the sale of its brand of
monitors in order to ensure the future sale of its brand of test strips. For
these reasons, we believe that manufacturers and suppliers will continue to
provide their services to Medicare beneficiaries.

If a manufacturer's rebate is not reported on a Medicare claim for code E0607,
and the beneficiary subsequently mails in the rebate form, and receives the
rebate, then the beneficiary receives a windfall in the amount of the rebate
and the Medicare program is not benefiting from the rebate. The beneficiary is
essentially paid for purchasing a certain brand of monitor.

This notice would effectively eliminate any windfall that beneficiaries
receive from manufacturer rebates that are not reported on Medicare claims for
code E0607.

We are not preparing analyses for either the RFA or section 1102(b) of the Act
since we have determined, and the Secretary certifies, that this notice would
not result in a significant economic impact on a substantial number of small
entities and would not have a significant impact on the operations of a
substantial number of small rural hospitals.

IV. Paperwork Reduction Act

This notice does not impose any information collection requirements.
Consequently, it need not be reviewed by the Executive Office of Management
and Budget under the authority of the Paper Reduction Act of 1980 (44 U.S.C.
3501 through 3511).

V. Response to Comments

Because of the large number of items of correspondence we normally receive on
FR documents published for comment, we are not able to acknowledge or respond
to them individually. We will consider all comments we receive by the date and
time specified in the "DATES'' section of this preamble, and, if we proceed
with a subsequent document, we will respond to the comments in the preamble to
that document.

(Section 1834(a)(10)(B) of the Social Security Act (42 U.S.C.
1395m(a)(10)(B)); 42 CFR 405.502(g))

(Catalog of Federal Domestic Assistance Program No. 93.774, Medicare
Supplementary Medical Insurance Program)

Dated: September 3, 1993.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: October 4, 1993.

Donna E. Shalala,

Secretary.

[FR Doc. 9466 Filed 1594; 8:45 am]

BILLING CODE 412001P


