Medicare Program; Special Payment Limits for Home Blood Glucose Monitors

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[BPD-778-PN]

RIN 0938-AG28

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: BPD-778-PN, 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 309-G, 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 BPD-778-PN. 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 309-G 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) 245-7890).

FOR FURTHER INFORMATION CONTACT: Joel Kaiser, (410) 966-4499.

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

Sec. 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 Sec. 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 100-203), 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 (CPI-U) 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 CPI-U

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'' (A-09-92-00034)--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.

Bruce Medical Supply (Winter 1993)

[Pricing for Home Blood Glucose Monitors]

------------------------------------------------------------------------

Shipping

List Basic & Final

Monitor price Rebate cost handling cost

(1) (2) (1+2)

------------------------------------------------------------------------

Checkmate.................. $61.90 \1\$61.9

0 $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 CPI-U 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. 94-66 Filed 1-5-94; 8:45 am]

BILLING CODE 4120-01-P