[Federal Register Volume 59, Number 4 (Thursday, January 6, 1994)]
[Notices]
[Pages 755-760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-66]


[[Page Unknown]]

[Federal Register: January 6, 1994]


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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.

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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