Medicare and Medicaid Coverage: Therapies and Supplies for	 
Inflammatory Bowel Disease (15-DEC-05, GAO-06-63).		 
                                                                 
Inflammatory bowel disease (IBD) affects an estimated one million
Americans. IBD patients often have difficulty digesting food. As 
a result, they may require parenteral nutrition (intravenous	 
feeding) or enteral nutrition (tube feeding), medically necessary
food products to supplement their diets, and medications. In	 
addition, some IBD patients must care for their 		 
ostomies--surgically created openings for the discharge of	 
digested food. IBD advocates have recently expressed concerns	 
regarding the ability of IBD patients to obtain the health care  
they need. The Research Review Act of 2004 directed GAO to study 
the Medicare and Medicaid coverage standards for individuals with
IBD, in both home health and outpatient delivery settings. GAO	 
(1) identified the Medicare and Medicaid coverage standards for  
five key therapies used for the treatment of IBD and (2)	 
determined what specific supplies used in these therapies	 
Medicare and Medicaid programs will pay for. In this work, GAO	 
examined Medicare's national and local coverage policies and	 
conducted a survey of Medicaid programs in the 50 states and the 
District of Columbia.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-63						        
    ACCNO:   A43318						        
  TITLE:     Medicare and Medicaid Coverage: Therapies and Supplies   
for Inflammatory Bowel Disease					 
     DATE:   12/15/2005 
  SUBJECT:   Diseases						 
	     Drugs						 
	     Health care programs				 
	     Medicaid						 
	     Medical equipment					 
	     Medical supplies					 
	     Medicare						 
	     Standards						 
	     Therapy						 
	     Prescription drugs 				 
	     Inflammatory Bowel Disease 			 

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GAO-06-63

Report to Congressional Committees

United States Government Accountability Office

GAO

December 2005

MEDICARE AND MEDICAID COVERAGE

Therapies and Supplies for Inflammatory Bowel Disease

Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel Disease
Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory Bowel
Disease Inflammatory Bowel Disease Inflammatory Bowel Disease Inflammatory
Bowel Disease Inflammatory Bowel Disease

GAO-06-63

Contents

Letter 1

Results in Brief 4
Background 6
Coverage of IBD Therapies Is Subject to Medicare and Medicaid Standards 11
Variation in Medicare and Medicaid Programs' Coverage of Specific Supplies
Related to IBD Therapies 18
Agency Comments 27
Appendix I Scope and Methodology 29
Appendix II Reported State Medicaid Program Coverage of Therapies Used by
IBD Patients 33
Appendix III Reported Parenteral Nutrition Therapy Coverage Standards by
State Medicaid Program 35
Appendix IV Reported Enteral Nutrition Therapy Coverage Standards by State
Medicaid Program 38
Appendix V Reported Medically Necessary Food Products Coverage Standards
by State Medicaid Program 41
Appendix VI Reported Parenteral Nutrition Supplies Covered by Medicaid in
Home Health and Outpatient Delivery Settings 43
Appendix VII Reported Enteral Nutrition Supplies Covered by Medicaid in
Home Health and Outpatient Delivery Settings 45
Appendix VIII Reported Percent of States Covering Ostomy Supplies in Home
Health and Outpatient Delivery Settings 47
Appendix IX Reported Information on Medicaid Coverage of Ostomy Supplies
and Related Limits 50
Appendix X Reported Medically Necessary Food Products Covered by State
Medicaid Program 52
Appendix XI Summary of Drugs Listed in Our Survey to Treat IBD That Are
Covered by Medicaid for Adults and Children 55
Appendix XII Comments from the Centers for Medicare & Medicaid Services 58
Appendix XIII GAO Contact and Staff Acknowledgments 60

Tables

Table 1: State Medicaid Programs That Reported Coverage of Five IBD
Therapies for Adults and Children 11
Table 2: State Medicaid Programs That Reported Payment of Common
Parenteral Nutrition Therapy Supplies for Adults and Children in Home
Health and Outpatient Delivery Settings 20
Table 3: State Medicaid Programs That Reported Payment for Common Enteral
Nutrition Therapy Supplies for Adults and Children in Home Health and
Outpatient Delivery Settings 21
Table 4: Median Percent of State Medicaid Programs That Reported Covering
Ostomy Supplies in Home Health and Outpatient Delivery Settings 24
Table 5: Number of State Medicaid Programs Covering Medically Necessary
Food Products for Adults and Children 25

Figure

Figure 1: Number of State Medicaid Programs That Reported Covering Drugs
Listed in Our Survey to Treat IBD 26

Abbreviations

BIPA Benefits Improvement and Protection Act of 2000 CMS Centers for
Medicare & Medicaid Services DMERC Durable Medical Equipment Regional
Carrier FDA Food and Drug Administration HCPCS Health Care Common
Procedure Coding System HHS Department of Health and Human Services IBD
inflammatory bowel disease LCD local coverage determination LMRP local
medical review policies NCD national coverage determination

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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copyright holder may be necessary if you wish to reproduce this material
separately.

United States Government Accountability Office

Washington, DC 20548

December 15, 2005

The Honorable Charles E. Grassley Chairman The Honorable Max Baucus
Ranking Minority Member Committee on Finance United States Senate

The Honorable Joe Barton Chairman The Honorable John D. Dingell Ranking
Minority Member Committee on Energy and Commerce House of Representatives

The Honorable William M. Thomas Chairman The Honorable Charles B. Rangell
Ranking Minority Member Committee on Ways and Means House of
Representatives

Inflammatory bowel disease (IBD) refers to two chronic autoimmune diseases
of the intestinal tract-Crohn's disease and ulcerative colitis. These
diseases may result in abdominal pain, weight loss, fever, rectal
bleeding, and diarrhea, and are associated with a decreased quality of
life. IBD generally involves periods of active inflammation alternating
with periods of remission.

The estimated one million Americans with IBD1-10 percent of whom are
children-have difficulty digesting food and may require different
treatments, depending on the specific nature of their condition. As a
result, some IBD patients may periodically require parenteral
nutrition-the provision of nutrients intravenously. Others may receive
enteral nutrition, which is delivered through a feeding tube inserted into
their noses or stomachs. Some IBD patients may require nutrition in the
form of medically necessary food products, such as formulas that are more
easily digested than normal foods.2 IBD patients may also require
medication, and some may have ostomies-surgically created openings in
their abdominal wall for the discharge of digested food-and therefore
depend on a pouching system to collect, contain, and manage disposal of
solid body waste.

1According to the Crohn's Disease and Colitis Foundation of America, the
number is evenly split between the two diseases.

A number of IBD patients depend on Medicare and Medicaid,3 the nation's
largest health insurance programs, for coverage of their treatment.
Medicare serves approximately 41 million elderly and certain disabled
beneficiaries and is administered by the Centers for Medicare & Medicaid
Services (CMS), an agency within the Department of Health and Human
Services (HHS). Based on the Social Security Act,4 CMS, and the claims
administration contractors that assist it in administering the Medicare
program, determine whether specific medical procedures, devices, and
services should be covered. Medicaid is a federal-state program that
finances health care coverage for approximately 54 million low income
individuals, about half of whom are children. Under CMS's oversight, each
state administers its own Medicaid program. Within broad coverage
requirements set by law and CMS, states have discretion to develop
specific coverage policies for their Medicaid programs. In fiscal year
2004, Medicare paid about $298 billion for services and supplies provided
to beneficiaries while Medicaid programs paid close to $272 billion.5

Over the past few years, IBD advocates have tried to raise awareness about
IBD and the challenges IBD patients face, including concerns about
obtaining the health care that they need to manage their disease. The
Research Review Act of 2004 contains several provisions related to IBD,
including a mandate that we conduct a study on the Medicare and Medicaid
coverage standards for IBD patients.6 The act required us to focus on five
specific therapies-in both home health and outpatient delivery
settings7-parenteral nutrition, enteral nutrition formula, ostomy care,8
medically necessary food products, and drugs approved by the Food and Drug
Administration (FDA) for Crohn's disease and ulcerative colitis.9 In this
report, we (1) identify the Medicare and Medicaid coverage standards for
these five therapies, and (2) determine which specific supplies used in
these therapies Medicare and Medicaid programs will pay for in home health
and outpatient delivery settings.

2Enteral nutrition formula may be also consumed orally, depending on the
patient's condition, instead of via tube-feeding. In this report, we
consider enteral nutrition formulas that are consumed orally as medically
necessary food products.

3The number of Medicare and Medicaid beneficiaries who are IBD patients is
not known.

4Medicare was established in 1965 in Title XVIII of the Social Security
Act and is codified as amended at 42 U.S.C. S:S: 1395-1395hhh.

5Medicaid payment includes federal and state contributions.

6Pub. L. No. 108-427, S: 4, 118 Stat. 2430, 2431.

To determine Medicare's coverage standards for the five therapies, we
obtained and reviewed relevant Medicare laws, regulations, national
coverage policies, and manuals to identify pertinent material. We also
interviewed CMS officials and the medical directors of the Durable Medical
Equipment Regional Carriers (DMERC)-the four claims administration
contractors involved in making local coverage decisions for applicable
therapies in our study. In addition, we discussed and obtained
documentation regarding specific supplies used in the five therapies that
Medicare would pay for in both home health and outpatient delivery
settings.

To obtain information on Medicaid's coverage of the five therapies, we
developed a survey that we sent to Medicaid offices in all 50 states and
the District of Columbia10 and asked them to identify applicable coverage
standards. The survey asked state officials to identify specific supplies
their Medicaid program would pay for. It also asked them to note any
distinctions between supplies covered in home health and outpatient
delivery settings, and to indicate whether they had different coverage
policies for adults and children.11 Our survey was generally based on
relevant Medicare coverage standards and provided states with the
opportunity to describe how their coverage policies varied from Medicare's
policies and to report other pertinent standards they may have
established. In addition, our survey included a list of drugs to treat IBD
that was developed in consultation with the FDA. Specifically, the survey
listed nine brand name drugs and two generic drugs that the FDA told us it
had approved to treat Crohn's disease and ulcerative colitis.12

7For purposes of this study, we defined home health care as a situation in
which medical supplies are provided to the patient by a home health
agency, in accordance with a plan provided by a physician. We defined
outpatient care as any situation, in which a patient receives medical
supplies, that does not require an overnight hospital stay, such as a
visit to a doctor's office, or a situation where the patient
self-administers the supplies at home, without the assistance of a home
health agency.

8The Research Review Act of 2004 specifically directed us to determine
coverage of ostomy supplies; consequently, we did not include any other
items and services that may relate to ostomy care in this study.

9In response to the Research Review Act of 2004, we also conducted a study
of the problems IBD patients encounter when applying for disability
insurance benefits under Title II of the Social Security Act. See GAO:
Social Security Disability Insurance: SSA Actions Could Enhance Assistance
to Claimants with Inflammatory Bowel Disease and Other Impairments,
GAO-05-495 (Washington, D.C.: May 31, 2005).

10Throughout the remainder of this report, we will refer to District of
Columbia as a state and count it as such when describing our survey
results.

We received responses from all of the states and reviewed these data for
obvious inconsistency errors and completeness. For responses that were
unclear or incomplete, we contacted survey respondents to obtain
clarification before conducting our analyses. When necessary, we compared
our electronic data files of survey responses to the actual surveys that
we obtained from states. Based on these efforts, we determined that the
data were sufficiently reliable for the purposes of this report. To obtain
detailed background on the specific supplies that are associated with each
of the therapies, we also contacted representatives from eight
organizations representing patients with IBD, and medical experts. (See
app. I for additional information on our scope and methodology.) We
conducted our work from December 2004 through November 2005, in accordance
with generally accepted government auditing standards.

                                Results in Brief

Medicare generally provides coverage for three of the five therapies we
reviewed-parenteral nutrition, enteral nutrition formula, and ostomy
care-for beneficiaries with IBD. Coverage is available in both home health
and outpatient delivery settings. Medicare has established standards that
must be met for parenteral and enteral nutrition to be covered. Patients
must have specific medical conditions in order to receive coverage. For
example, Medicare will cover parenteral nutrition for a patient with a
severe gastrointestinal condition that impairs absorption of nutrients,
and enteral nutrition for a patient with a functioning gastrointestinal
tract who cannot maintain adequate weight and strength because food cannot
reach the digestive tract. In addition, Medicare requires such medical
conditions to be well documented in order to cover these two therapies.
Medicare has one coverage standard governing the provision of ostomy
care-the beneficiaries receiving these supplies have had an ostomy.
Medicare does not cover medically necessary food products. Similarly,
Medicare does not cover most drugs used by IBD patients-these drugs are
typically self-administered prescription drugs, and currently, they are
not covered by the program. However, medically necessary drugs, including
those that are self-administered, will be covered by Medicare's voluntary
prescription drug benefit, which becomes effective in January 2006. Unlike
Medicare, each state Medicaid program covers, to some extent, at least one
of the five therapies, including medically necessary food products and
drugs used to treat IBD. Our survey results also indicated that each state
Medicaid program has its own coverage standards; however, most states'
standards are generally comparable to Medicare's coverage for parenteral
and enteral nutrition and ostomy care.

11Because Medicare does not cover children, except in very limited
circumstances not applicable to this report, such a distinction was not
necessary for the Medicare analysis.

12The nine brand name drugs listed in our survey were Asacol, Azulfidine,
Canasa, Colazal, Dipentum, Entocort, Pentasa, Remicade, and Rowasa. The
survey also listed the generic equivalents of two of these drugs,
Azulfidine and Rowasa. After we administered our survey, the FDA informed
us that it also considers several additional drugs as valid treatments for
IBD. These drugs are not discussed in this report.

Once Medicare coverage standards are met, the program will generally
cover-with very few restrictions-all medically necessary formulas,
administration supplies, and equipment associated with both parenteral and
enteral nutrition. Medicare will also provide beneficiaries who have had
ostomies with supplies for their ostomy care. Although Medicare has
established "usual maximum quantities" of supplies that typically meet the
needs of ostomy patients, these amounts may be exceeded if the need is
justified. Our survey of Medicaid programs shows variation in the specific
supplies covered for the five therapies. We found that states generally
cover supplies associated with parenteral nutrition therapy. Similarly,
states cover most enteral nutrition supplies. However, states' coverage of
specific ostomy supplies varies. We found that twenty-four states covered
all of the ostomy supplies listed in our survey in both home health and
outpatient delivery settings. Fifteen of these 24 states imposed limits
and monetary caps on these supplies. Further, 10 of these 15 states
reported that, for certain supplies, the supply limits and monetary caps
are rarely or never exceeded. Most states-46-reported covering at least
some medically necessary food products with oral nutritional formulas
being the item most commonly covered. Finally, our survey results show
that Medicaid programs generally cover the brand name drugs and generic
equivalent drugs listed in our survey to treat IBD.

In commenting on a draft of this report, CMS said that we correctly
described the Medicare coverage policies for parenteral and enteral
nutrition and ostomy supplies and provided clarification for our
description of Medicare's coverage policy for prescription drugs that are
not self-administered. It also said that as it proceeds with policy
development, it will continue to give consideration to access issues that
affect Medicare beneficiaries and Medicaid recipients in their treatment
of IBD.

                                   Background

IBD refers to Crohn's disease and ulcerative colitis.13 Crohn's disease
can involve any area of the gastrointestinal tract but most commonly
affects the small intestine, which is responsible for the body's
absorption of most needed nutrients, and the beginning of the large
intestine, or colon. This inflammation can result in excessive diarrhea,
severe rectal bleeding, anemia, fever, and abdominal pain. In addition,
malnutrition or nutritional deficiencies are also common among Crohn's
disease patients, particularly if the disease is extensive and of long
duration. Two-thirds to three-quarters of patients with Crohn's disease
will require surgery-in most cases, to remove the diseased segment of the
bowel and any associated abscess. In some cases, an ostomy to remove the
colon also may be required. However, surgery is not considered a cure for
Crohn's disease patients because the disease frequently recurs. Ulcerative
colitis only affects the colon. This condition causes diarrhea and
bleeding, and can ultimately lead to colon cancer. In one-quarter to
one-third of patients with ulcerative colitis, medical therapy is not
completely successful or complications arise. Under these circumstances,
an ostomy operation may be performed. Because inflammation in ulcerative
colitis is confined to the colon, the disease is curable by this
operation.

IBD may occur at any age, but it most commonly develops between the ages
of 10 and 30. One-third of IBD patients develop symptoms before
adolescence. In such cases, the disease poses special problems because it
can impair children's bodies' ability to absorb nutrients and thus
adversely affects their growth and development.

13About 10 percent of IBD patients exhibit symptoms of both Crohn's
disease and ulcerative colitis. This condition is referred to as
indeterminate colitis.

IBD patients, depending on each individual's unique circumstances, may
rely on one or more of the following key therapies in either home health
or outpatient delivery settings to manage their disease:

           o  Parenteral nutrition is the intravenous administration of
           nutrients through a catheter that carries liquid nutrients
           directly into the bloodstream, where they are absorbed by the
           body, entirely bypassing the gastrointestinal tract. It is
           typically used to treat patients with severe cases of IBD. In such
           instances, patients' gastrointestinal tracts cannot tolerate
           nutrition by mouth or a feeding tube. The provision of parenteral
           nutrition allows the intestines to rest and heal, and may relieve
           acute attacks and delay or avoid the need for surgery. Supplies
           used in parenteral nutrition include parenteral nutrition
           solutions and various products necessary to administer the
           solutions to the patient, such as infusion pumps and intravenous
           poles. Parenteral nutrition supply kits include supplies necessary
           to transfer the solution to the infusion pump, such as tubes, and
           sterilization pads. Parenteral nutrition administration kits
           include supplies necessary to transfer the solution from the pump
           to the patient, such as intravenous catheters, dressings, tapes,
           antiseptics, and sterile gloves.14

           o  Enteral nutrition is indicated for patients with a functioning
           gastrointestinal tract but whose oral nutrient intake is
           insufficient to meet their nutritional needs. Enteral nutrition
           employs a feeding tube to deliver a liquid nutritional formula to
           the stomach or small intestine-it is administered either through
           the nose or directly through the abdominal wall into the
           gastrointestinal tract. For IBD patients, and particularly for
           Crohn's disease patients whose inflamed small intestine may not
           allow them to absorb enough nutrients, this method-either used
           alone, or in combination with food or liquids taken orally-may
           restore good nutrition to patients weakened by severe diarrhea and
           poor nutrition. In addition, according to gastrointestinal disease
           experts, enteral nutrition may have therapeutic effects as well,
           by inducing remission. Supplies used in enteral nutrition include
           enteral formulas and supplies necessary to administer this
           therapy, such as enteral nutrition infusion pumps, intravenous
           poles, catheters, and tubes. Enteral feeding supply kits include
           supplies necessary to administer the formula to the patient, such
           as syringes, tubing to transfer the formula to the catheter, tube
           connectors, and sterile gloves.15 Tubing that goes inside the
           patient's body to administer the nutrients-i.e., nasogastric
           tubing that delivers the formula to the patient's gastrointestinal
           system through the nose, or gastrostomy tubing that delivers the
           formula through a surgically created opening in the stomach-is
           also necessary. Other supplies needed may include additives, such
           as fiber, to thicken enteral formulas.

           o  Medically necessary food products are products that can be
           taken orally. They include food supplements, such as the formulas
           used in enteral nutrition, and prescription strength vitamins. For
           example, because Crohn's disease and surgical procedures that
           remove parts of the small intestine can inhibit absorption of
           vitamins, fats, and other important nutrients, taking certain
           supplements, such as fish oil, antioxidants, and mineral
           supplements, may be beneficial for patients with Crohn's disease.

           o  Medications are often required to treat Crohn's disease and
           ulcerative colitis. The FDA has approved both brand name drugs and
           generic drugs to treat IBD. These drugs are typically
           self-administered and taken to reduce inflammation in the
           intestinal wall. In addition, there are other medications approved
           by the FDA-but not specifically to treat IBD-that may be effective
           in treating the disease.16

           o  IBD patients who have had an ostomy operation need to use
           specific supplies for their ostomy care. An ostomy surgery creates
           an opening in the abdomen. This opening, called a stoma, permits
           digested food to exit the body. In most cases, this type of
           surgery results in a permanent opening.17 Subsequent to the
           operation, ostomy patients need certain supplies to manage the
           abdominal opening and the waste. For example, the patient wears a
           pouch over the opening to collect the waste and then empties the
           pouch as needed. Other necessary supplies include skin barriers to
           protect the skin and irrigation and fluid discharge supplies.

           Medicare pays for beneficiaries' medically necessary health care
           needs as long as they fit into one of the broadly-defined
           categories of benefits established in the Social Security Act.
           Among other things, these categories include commonly used medical
           services and supplies such as physician visits, inpatient hospital
           stays, diagnostic tests, durable medical equipment, and prosthetic
           devices. While the act provides for broad coverage of many medical
           and health care services, it does not provide an exhaustive list
           of all services covered.18 Similarly, the act generally does not
           specify which medical devices, surgical procedures, or diagnostic
           services the program covers. In addition, the act states that the
           program cannot pay for any supplies or services that are not
           "reasonable and necessary" for the diagnosis and treatment of an
           illness or injury.19 With the Social Security Act serving as the
           primary authority for all coverage provisions, CMS has established
           coverage policies that specify the procedures, devices, and
           services that are covered in the broad benefit categories
           established in the act.20 In addition, CMS has established the
           criteria used to determine whether these supplies are reasonable
           and necessary for a beneficiary's treatment. CMS's national
           coverage determinations (NCDs) describe the circumstances for
           Medicare coverage for a specific medical service, procedure, or
           device and they outline the conditions for coverage.21 CMS
           interpretive manuals further define when and under what
           circumstances items or services may be covered.

           Claims administration contractors are required to follow CMS's
           national coverage policies. However, if an NCD does not
           specifically exclude or limit coverage for an item or service, or
           if the item or service is not mentioned at all in an NCD or CMS
           manual, it is up to the contractors to determine whether they will
           cover a particular item or service within their geographic area.
           This is often done through a local coverage determination

           (LCD).22 LCDs specify under what circumstances the item or service
           is considered to be reasonable and necessary, in accordance with
           the Social Security Act, and are supplemented by additional
           instructions from the contractors. LCDs related to durable medical
           equipment, prosthetic devices, orthotics, and a number of other
           supplies are made by the DMERCs-the four CMS claims administration
           contractors that process claims exclusively for these supplies.
           The DMERCs are required by CMS to coordinate their coverage
           development process with one another and they publish identical
           LCDs.23

           Medicaid coverage policies vary by state. While all state Medicaid
           programs must pay for certain services, such as inpatient and
           outpatient hospital services, and early and periodic screening,
           diagnostic, and treatment services for individuals under the age
           of 21, states have broad discretion in setting up their Medicaid
           programs. They may set different eligibility standards, scope of
           services, and payments, and can elect to cover a range of optional
           populations and benefits.24

           Medicare generally covers parenteral and enteral nutrition and
           ostomy care in home health and outpatient delivery settings for
           beneficiaries who meet certain medical standards. These three IBD
           therapies are included in specific benefit categories established
           by the Social Security Act-primarily the prosthetic devices
           benefit category, and in the case of ostomy care provided in a
           home health care delivery setting, the home health benefit
           category. Medicare does not cover medically necessary food
           products or most drugs approved by the FDA that are used to treat
           IBD. However, in January 2006, Medicare will begin to cover
           medically necessary drugs when the program's new prescription drug
           benefit becomes effective. None of the five therapies we examined
           for this report are mandatory services under Medicaid. However,
           our survey of Medicaid programs indicates that most of these
           programs provided eligible individuals some coverage for all five
           therapies. We also found that coverage standards that Medicaid
           recipients must meet to receive these therapies varied by state.
           Table 1 summarizes the number of states covering each of the five
           therapies. (See app. II for specific information on each state
           Medicaid program's coverage of these therapies.)

           Table 1: State Medicaid Programs That Reported Coverage of Five
           IBD Therapies for Adults and Children

           Source: GAO survey of state Medicaid programs.

           aFor this analysis, we are defining states' coverage of drugs to
           treat IBD as states' coverage of at least one of the brand name
           drugs or generic equivalent drugs listed in our survey.

           Our analysis showed that Medicare and state Medicaid programs will
           generally cover parenteral nutrition as follows:

           Medicare: Medicare generally covers parenteral nutrition, as CMS
           has determined that it falls under the prosthetic devices benefit
           category, established in the Social Security Act.25 CMS's coverage
           standards for parenteral nutrition therapy are outlined in both an
           NCD and in local coverage policy.26 Coverage is provided in both
           home health and outpatient delivery settings. The NCD requires the
           patient to have a severe pathology of the alimentary tract27 that
           does not allow absorption of sufficient nutrients to maintain
           weight and strength commensurate with the patient's general
           condition. A period of hospitalization is required to initiate
           coverage for parenteral nutrition and to train the patient in how
           to prepare, manage, and administer the formula and equipment. The
           NCD also requires a physician's written order or prescription and
           sufficient medical documentation to show that the prosthetic
           device coverage requirements are met and that parenteral nutrition
           therapy is medically necessary. In addition, before approving
           coverage, the carrier must agree that a particular condition
           qualifies for parenteral nutrition therapy. Medicare will approve
           coverage of parenteral nutrition at periodic intervals of no more
           than three months. In addition, Medicare will pay for no more than
           one month's supply of nutrients at a time.

           Building upon the coverage standards in the NCD, the DMERCs' local
           coverage policy on parenteral nutrition provides significantly
           more detailed requirements. The policy consists of specific
           clinical criteria for showing that parenteral nutrition is
           considered reasonable and necessary. Like the NCD, the local
           policy specifies that a patient must either have a condition
           involving the small intestine that significantly impairs the
           absorption of nutrients, or a disease of the stomach or intestine
           that impairs the ability of nutrients to be transported through
           the gastrointestinal system. The local coverage policy also
           requires that the patient's inability to maintain proper weight
           and strength necessitates intravenous nutrition, and that the
           patient is unable to be treated through either diet modification
           or with drugs.28 It also describes specific clinical conditions
           that meet these criteria. For patients who do not meet the
           standards for these clinical conditions, coverage for parenteral
           nutrition will be considered on an individual basis if detailed
           documentation is submitted. However, some patients with moderate
           abnormalities may not be covered unless they have experienced an
           unsuccessful trial of enteral nutrition.

           Medicaid: Our survey responses indicated that all states provide
           some parenteral nutrition coverage for children and all but
           one-Georgia-provide such coverage for adults. However, Georgia
           reported that it would consider coverage for adults under an
           appeal process to its medical director. Our results showed
           variation among states in the standards used to determine coverage
           for parenteral nutrition. Seven states used all six of the
           coverage standards listed in our survey to determine whether
           Medicaid would cover parenteral nutrition therapy for adults and
           children.29 The remaining 44 states used a variety of the six
           coverage standards. For example, Arkansas, California, Kentucky,
           North Carolina, and Oregon require individuals to meet three of
           the six standards, including pathology and documentation.
           Forty-five states indicated that before covering parenteral
           nutrition therapy for individuals, they would require some form of
           documentation, such as proof of a medical condition. Forty-one of
           these same states also required individuals to have a severe
           pathology of the gastrointestinal tract that would not allow
           absorption of sufficient nutrients to maintain weight and
           strength. Only one state-Minnesota-provided coverage for
           parenteral nutrition therapy without listing any specific
           conditions that individuals must meet to receive therapy. For
           details on specific coverage standards for parenteral nutrition
           therapy by state, see app. III.

           Our analysis showed that Medicare and most state Medicaid programs
           will generally cover enteral nutrition as follows:

           Medicare: Medicare covers enteral nutrition under the prosthetic
           devices benefit category. The NCD coverage standards for enteral
           nutrition are very similar to those for parenteral nutrition, with
           the primary difference being the requirements involving the
           patient's clinical condition. As with parenteral nutrition,
           coverage for enteral nutrition is provided in both home health and
           outpatient delivery settings. However, for enteral nutrition, the
           patient may have a functioning gastrointestinal tract but must be
           unable to maintain appropriate weight and strength due to
           pathology to, or the nonfunction of, the structures that normally
           permit food to reach the digestive tract. The only other differing
           requirement in the NCD between the two therapies is that there is
           no hospitalization requirement for a patient seeking Medicare
           coverage for enteral nutrition. The NCD also requires a
           physician's written order or prescription and sufficient medical
           documentation to show that the prosthetic device coverage
           requirements are met and that enteral nutrition therapy is
           medically necessary.

           The local coverage policy on enteral nutrition is simpler than the
           local policy for parenteral nutrition. It provides coverage for
           enteral nutrition so long as adequate nutrition is not possible by
           either dietary adjustment or oral supplements. Tube feedings of
           enteral nutrition must be required to provide sufficient nutrients
           to maintain weight and strength commensurate with the patient's
           overall health status due to either one of two conditions: (1) a
           permanent non-function or disease of the structures that normally
           permit food to reach the small bowel, or (2) a disease of the
           small bowel which impairs digestion and absorption of an oral
           diet. However, coverage is possible for patients with partial
           impairments, such as a Crohn's disease patient who requires
           prolonged infusion of enteral nutrients to overcome a problem with
           absorption. Enteral nutrition products administered orally are not
           covered.

           Medicaid: Forty-nine states reported that they provided some
           coverage for enteral nutrition therapy for both adults and
           children. One state-Oklahoma-indicated that it provided coverage
           for children, but not for adults. West Virginia responded that it
           did not cover this therapy at all. Analysis of survey results also
           indicated that there was some variation in coverage standards used
           among the 49 states that covered enteral nutrition therapy for
           adults and children. Six states reported that they cover enteral
           nutrition therapy for patients who meet all six coverage standards
           listed in our survey.30 The remaining states used a variety of the
           six coverage standards. For example, Arizona, Colorado, Michigan,
           New Mexico, and Wisconsin indicated that they use five of the six
           standards-these states did not require the patient to have a
           permanent condition in order to be covered for this therapy.
           Washington reported that, in addition to subjecting individuals to
           most of the criteria listed in our survey, it also requires prior
           approval of enteral nutrition therapy based on documentation
           showing that the therapy is medically necessary and outlining why
           traditional food is not appropriate. We also found that for both
           adults and children, 45 of the 49 states that cover enteral
           nutrition therapy require individuals to have specific
           documentation in their medical records before the states would
           render coverage. We also found that 12 states had less restrictive
           coverage standards for children. See app. IV for more details on
           enteral nutrition therapy and supplies coverage standards for each
           state.

           Medicare and Medicaid provide at least some coverage of ostomy
           care. In outpatient delivery settings, Medicare covers ostomy care
           for IBD patients under its benefit category of prosthetic
           devices-similar to parenteral and enteral nutrition. In home
           health care delivery settings, Medicare covers this therapy as a
           home health benefit.31 While there is no NCD for ostomy care, the
           four DMERCs have established a local coverage policy for these
           supplies. According to the policy, the only Medicare coverage
           standard is that the patient must have had an ostomy. Similarly,
           all state Medicaid offices, according to our survey responses,
           provide coverage of ostomy care for adults and children who have
           had ostomies.

           Medicare does not cover medically necessary food products because
           such supplies are not included in any of the benefit categories
           contained in the Social Security Act.32 On the other hand,
           according to our survey results, Medicaid provides at least some
           coverage of medically necessary food products to its recipients in
           46 of the states. Nevada, North Carolina, Ohio, Utah, and West
           Virginia were the five states that did not provide any coverage
           for medically necessary food products. Of those states reporting
           that they provided coverage, 14 also noted that they had a
           requirement that the individuals receive a certain percentage of
           their nutrition from oral supplements in order for these
           supplements to be covered. In some instances, this percentage was
           as high as 75 to 100 percent. For example, Florida, Georgia,
           Mississippi, Rhode Island, and South Dakota required some
           individuals to meet 100 percent of their nutritional requirements
           from oral supplements; however these individuals did not have to
           meet all of the other conditions listed in our survey. On the
           other hand, while North Dakota reported that individuals must
           receive at least 51 percent of their nutrition from oral
           supplements, it had the most stringent standards overall because
           it required that individuals meet all three conditions for
           coverage listed in our survey.33 For more information on states'
           coverage standards for medically necessary food products, see app.
           V.

           Medicare does not generally cover medications that are
           self-administered, including drugs approved by the FDA to treat
           IBD. Coverage is not provided because such self-administered
           medications are not included in any of the benefit categories
           contained in the Social Security Act.34 However, in 2003, the
           Social Security Act was amended, establishing a new voluntary
           prescription drug benefit for Medicare beneficiaries that will
           become effective in January 2006.35 At that time, Medicare will
           begin to cover self-administered drugs approved by the FDA to
           treat IBD.36

           States generally provide some coverage of drugs approved by the
           FDA to treat IBD. Generally, before covering a drug, states
           require that: (1) a physician or licensed practitioner writes the
           prescription; (2) a licensed pharmacist or licensed authorized
           practitioner dispenses the prescription; and (3) the drug is
           dispensed on a written prescription that is recorded and
           maintained in the pharmacist's or practitioner's records. Our
           survey did not ask state Medicaid programs about the standards
           used to determine coverage of drugs to treat IBD because state
           Medicaid programs are not required to cover prescription drugs.

           Our survey also asked state officials whether their Medicaid
           programs cover the off-label use of drugs to treat IBD. Responses
           to this question varied. Nineteen states responded that they had
           no policy for the use of off-label drugs or that their state did
           not cover off-label use. Many of these respondents wrote that they
           only covered drugs approved by the FDA to treat IBD. Twenty-four
           states indicated that they cover off-label drug use. However, 20
           of these 24 states responded that they would only cover the drug
           under certain conditions. Many of these states reported that
           individuals obtaining such prescriptions must receive prior
           approval or documentation justifying medical necessity. Michigan
           has the most detailed off-label coverage policy of all the states;
           it indicated that off-label drugs must receive prior authorization
           as well as documentation outlining the (1) diagnosis, (2) medical
           reason why the individual cannot use another covered drug; (3)
           results of therapeutic alternative medication tried, and (4)
           medical literature citations supporting the off-label usage. The
           remaining eight states did not respond to this question.

           Once coverage standards are met, Medicare generally covers all
           medically necessary supplies for the administration of parenteral
           and enteral nutrition and ostomy care-the three therapies that
           this program covers. On the other hand, our survey of Medicaid
           programs showed that although most states provide eligible
           individuals at least some coverage of each of the five therapies
           addressed in this report, the specific supplies that states will
           pay for vary and may be subject to restrictions. According to our
           survey results, most states will cover necessary supplies related
           to parenteral and enteral nutrition with only slight variations
           for the specific supplies supplied. We also found that, while all
           states provided some coverage of ostomy care, the specific
           supplies that states cover varied. Our survey also showed that,
           while most states will cover at least one of the five medically
           necessary food products listed in our survey, no state covers all
           of them for both adults and children. Finally, we found that most
           Medicaid programs generally covered many of the brand name drugs
           and equivalent generic drugs listed in our survey.

           Medicare will generally cover parenteral nutrition therapy
           supplies, such as nutrients and administration supplies, for
           beneficiaries who have met applicable coverage standards.
           Specifically, according to the applicable local coverage policy,
           Medicare will cover necessary parenteral nutrition solutions. In
           addition, when coverage requirements for parenteral nutrition are
           met, Medicare will also pay for one supply kit and one
           administration kit for each day that parenteral nutrition is
           administered, if such kits are medically necessary and used.
           Medicare will also cover infusion pumps-only one pump will be
           covered at any one time.

           The local coverage policy also outlines several documentation
           requirements for ensuring that the patient's medical
           records-including test reports and records from the physician's
           office, home health agency, hospital, nursing home, and other
           health care professionals-establish the medical necessity for the
           care provided. These records must be made available to the DMERC
           upon request. In addition, an order for each item billed and a
           certificate of medical necessity37 must be signed and dated by the
           treating physician, kept on file by the supplier, and be made
           available to the DMERC. Besides the initial certification, there
           are also documentation requirements if recertifications or revised
           certifications are necessary.38

           States' Medicaid coverage of the five most commonly used
           parenteral nutrition therapy supplies shows some variation,
           depending on the item and the delivery setting. As table 2 shows,
           parenteral nutrition therapy supplies-such as the infusion
           pump-are covered by more states than the parenteral nutrition
           solution. In addition, more states reported that they cover
           parenteral nutrition therapy supplies in outpatient delivery
           settings than in home health delivery settings. There was little
           difference in the coverage of various supplies between adults and
           children.

           Table 2: State Medicaid Programs That Reported Payment of Common
           Parenteral Nutrition Therapy Supplies for Adults and Children in
           Home Health and Outpatient Delivery Settings

           Source: GAO survey of state Medicaid programs.

           Further analysis of survey results revealed that 28 states covered
           all supplies in both home health and outpatient delivery settings
           for adults and children. For more specific information on the
           parenteral nutrition supplies covered by each state, see app. VI.

           Medicare will generally cover supplies associated with enteral
           nutrition therapy for beneficiaries who meet coverage standards.
           According to the enteral nutrition local coverage policy, Medicare
           will cover all enteral formulas for covered beneficiaries.39 In
           addition, Medicare will also cover medically necessary equipment
           and supplies for this therapy, such as feeding supply kits and
           pumps that are associated with the specific method of
           administration used by the patient. However, a few limitations
           apply. For example, claims for more than one type of kit delivered
           on the same date will be denied as not medically necessary.
           Similarly, Medicare will rarely consider the use of more than
           three nasogastric tubes or one gastrostomy tube over a 3-month
           period as medically necessary.

           The local coverage policy also outlines several documentation
           requirements for coverage of enteral nutrition supplies. Similar
           to the parenteral nutrition local policy, the enteral nutrition
           policy requires that the patient's medical record reflect the need
           for the care provided. It also has requirements associated with
           the certification of enteral nutrition. For example, if the
           physician orders enteral nutrition supplies for a longer period of
           time than is indicated on the original certificate of medical
           necessity, the enteral nutrition policy will require
           recertification. However, the enteral nutrition policy generally
           has fewer documentation requirements than that of parenteral
           nutrition.

           Based on our survey, state Medicaid programs' payment for seven of
           the most commonly used enteral nutrition therapy supplies varies
           depending on the type of product, delivery setting, and whether
           the patient is an adult or a child. Table 3 shows that states
           reported that their Medicaid programs pay for enteral feeding
           supply kits and tubing more than other therapy supplies. In
           addition, more states pay for enteral supplies for children than
           adults and more states pay for supplies in outpatient delivery
           settings than in home health delivery settings.

           Table 3: State Medicaid Programs That Reported Payment for Common
           Enteral Nutrition Therapy Supplies for Adults and Children in Home
           Health and Outpatient Delivery Settings

           Source: GAO survey of state Medicaid programs.

           Further analysis revealed that 15 states pay for all seven
           supplies listed in our survey in both home health and outpatient
           delivery settings for adults and children. Thirty states pay for
           five or more enteral nutrition supplies for adults and children in
           these same settings. We also found that additives for enteral
           formula, such as fiber, are the least covered product, with only
           21 states covering it in both home health and outpatient delivery
           settings for adults and children. For specific results of enteral
           nutrition supplies provided by each state, see app. VII.

           Medicare covers all of the types of ostomy supplies used by IBD
           patients who require ostomy care. However, there are two
           restrictions regarding the types of ostomy supplies covered.
           First, Medicare will only provide a beneficiary with one type of
           liquid skin barrier40 if one is needed-either a liquid or spray
           barrier, or individual wipes. Second, Medicare will only pay for
           one type of drainage supply-a stoma cap, a stoma plug, or gauze
           pads-on a given day. These restrictions are imposed by the DMERCs
           in a local coverage policy, which also specifies the "usual
           maximum quantity" of supplies that typically meet the needs of
           ostomy patients for a specific time period (generally for either 1
           or 6 months) for each of the most commonly used ostomy supplies.41
           However, according to the four DMERC medical directors, these
           quantities only serve as guidelines. Because the need for ostomy
           supplies can vary substantially among patients,42 DMERCs may cover
           supplies that exceed the usual maximum quantities if the need is
           justified.

           Medicare's coverage of ostomy supplies is different for IBD
           patients who receive care under a home health plan of care than
           for those who receive it in an outpatient delivery setting.43 If
           an IBD patient is being served by a home health agency and is
           under a home health plan of care, all of the patient's medical
           supplies, including ostomy supplies, are considered part of the
           Medicare home health services benefit. This is generally the case
           even when the IBD is a pre-existing condition unrelated to the
           immediate reason for home health care, such as hip replacement
           surgery.44 Medicare pays a fixed amount determined under a
           prospective payment system to the home health agency for the cost
           of all covered home health visits, including ostomy supplies
           delivered during these visits.45 The home health agency is
           obligated to provide the beneficiary with the necessary ostomy
           supplies, which are bundled with all other necessary home health
           services. The home health agency selects the type of ostomy
           products to be used and if the patient wishes to use different
           products, the patient must do so at his or her own expense. This
           practice can be contrasted to the outpatient delivery setting,
           where the products are generally selected by the patient, or the
           patient's doctor.46

           All states responded that their Medicaid programs pay for ostomy
           supplies for adults and children who have had ostomies; however
           the range of supplies covered varied. Because of the relatively
           large number of supplies commonly used by ostomy patients we
           grouped these supplies in nine categories, based on input from a
           representative of the United Ostomy Association. Table 4 shows the
           median percent of states covering ostomy supplies in home health
           and outpatient delivery settings, after they have been placed in
           these categories. For example, for the 14 supplies in the
           drainable pouch with standard barrier supplies category-half of
           supplies are covered by at least 84 percent of states in home
           health delivery settings and 85 percent of states in outpatient
           delivery settings. In general, states' coverage of ostomy supplies
           was greater in outpatient, than in home health delivery settings.
           For more details on the individual ostomy supplies included in
           each category and the percent of states covering each supply, see
           app. VIII.

           Table 4: Median Percent of State Medicaid Programs That Reported
           Covering Ostomy Supplies in Home Health and Outpatient Delivery
           Settings

           Source: GAO survey of state Medicaid programs.

           Note: Individual supplies under each category appear in app. VIII.

           Twenty-four states reported covering all of the ostomy supplies
           listed in our survey in both delivery settings. Nine of the 24
           states that covered all supplies imposed no supply limits or
           dollar caps on individuals. The remaining 15 states reported that
           they had supply limits or dollar caps; however five of these
           states-Arizona, Hawaii, North Dakota, Rhode Island, and
           Virginia-added that they often allowed individuals to exceed these
           limits and caps for certain supplies. For example, one state
           reported that while it has a supply limit of one box of 50 skin
           barrier wipes and dollar cap of $9.36 per month, it will often
           allow individuals to exceed limits and caps. See app. IX for more
           details on individual states' coverage of supplies, including
           supply limits and dollar caps, in both home health and outpatient
           delivery settings.

           Unlike Medicare, which does not pay for any medically necessary
           food products, most state Medicaid programs pay for some products.
           These products include prescription strength vitamins, oral
           nutritional formulas, food thickeners, baby foods, blended grocery
           products, and other supplies. According to our survey, 46 states
           reported covering at least one of the five products listed in our
           survey for either adults or children.

           As table 5 shows, out of the five food products, state Medicaid
           programs reported paying for oral nutritional formulas most often.
           Baby food and other blenderized products were the least common
           products covered with only four states-Missouri, New Jersey,
           Tennessee, and Texas-reporting that they paid for these products.
           In addition, more states paid for medically necessary food
           products for children than for adults.

           Table 5: Number of State Medicaid Programs Covering Medically
           Necessary Food Products for Adults and Children

           Source: GAO survey of state Medicaid programs.

           For more details on states' payment of medically necessary food
           products, see app. X.

           All states reported that their Medicaid programs paid for at least
           one of the nine brand name drugs or two of the generic drugs that
           were included in our survey and which were approved by the FDA to
           treat IBD. Figure 1 shows the number of states covering each drug.
           The brand name drug Remicade was the most commonly paid for drug,
           with all states reporting payment.47 The generic drugs available
           for Azulfidine and Rowasa were covered by 48 and 46 states
           respectively.

14Specific supplies included in the parenteral supply kits and
administration kits can vary, depending on the supplier.

15Specific supplies included in the enteral feeding supply kits can vary
depending on specific patient needs.

16The prescribing of a drug for treatments other than those specified on
the label approved by FDA is referred to as off-label use.

17Not all ostomies are permanent. According to one gastrointestinal
expert, about 20 percent of ostomies are temporary. A temporary ostomy is
more common among younger patients, while Medicare patients are more
likely to have permanent ostomies.

18Congress gave the Secretary of Health and Human Services the authority
to decide which specific supplies and services within these categories are
covered by Medicare.

19Specifically, the law states that Medicare cannot pay for any supplies
or services that are not "reasonable and necessary for the diagnosis and
treatment of an illness or injury or to improve functioning of a malformed
body part." 42 U.S.C. S:1395y(a)(1)(A).

20The Secretary of Health and Human Services delegated the legal authority
to specify which procedures, devices, and services are covered in the
Social Security Act's benefit categories to CMS and its contractors.

21NCDs are typically issued as program instruction and are binding on all
Medicare claims administration contractors. NCDs must be made available
for public comment prior to finalization. The law also requires proposed
NCDs to be reviewed by either the Medicare Coverage Advisory Committee or
outside clinical experts. NCDs are also binding on Administrative Law
Judges during the claims appeal process.

22LCDs are considered administrative and educational tools that provide
guidance to the public and medical community within the contractor's
jurisdiction, and assist providers in submitting correct claims for
payment. When developing LCDs, contractors consider medical literature,
the advice of local medical societies and medical consultants, public
comments, and comments from the provider community. LCDs must also be
consistent with all statutes, rulings, regulations, and national coverage,
payment, and coding policies. During the claims appeal process,
administrative law judges may consider LCDs, but they are not bound by
them.

23The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA) defined the term LCD as including only decisions as to
whether items or services are "reasonable and necessary." Pub. L. No.
106-554, app. F, S: 522(a), 114 Stat. 2763A, 2763A-546. Prior to the
passage of BIPA, the DMERCs had issued documents called Local Medical
Review Policies (LMRPs) to indicate all coverage information for
parenteral and enteral nutrition and ostomy supplies, including a
determination of whether items and services are reasonable and necessary.
CMS has required the DMERCs to convert existing LMRPs to LCDs. According
to CMS guidance, these new LCDs should contain only determinations on
reasonableness and necessity, and other instructions from the DMERCs, such
as coding guidelines, are issued in other publications called policy
articles. As of September 2005, the DMERCs had issued LCDs and related
policy articles for enteral nutrition and ostomy supplies, but not for
parenteral nutrition. Throughout the report, we use the term local
coverage policy to describe all DMERC decisions and instructions,
regardless of whether they are found in an LMRP, LCD, or policy article.

24Optional supplies and services include, among others, prescribed drugs,
prosthetic devices, home health care services, dental services, and
physical therapy.

    Coverage of IBD Therapies Is Subject to Medicare and Medicaid Standards

                                                             Medically        
                            Parenteral   Enteral Ostomy necessary food 
                             nutrition nutrition   care       products Drugsa
Adults and children              50        49     51             40     50 
Adults only                       0         0      0              0      1 
Children only                     1         1      0              6      0 
Not covered for adults                                                     
or children                       0         1      0              5      0
Total                            51        51     51             51     51 

Medicare and Medicaid Coverage Standards for Parenteral Nutrition

25Covered prosthetic devices are "devices (other than dental) which
replace all or part of an internal body organ (including colostomy bags
and supplies directly related to colostomy care), including replacement of
such devices." 42 U.S.C. S: 1395x(s)(8).

26Per CMS requirements, DMERCs have to establish identical coverage
policies; therefore, their policies are worded the same. For
simplification purposes, we will refer to these policies as a single
policy throughout the rest of the report.

27The alimentary tract consists of the passage that extends from the mouth
to the anus and is responsible for the movement of food through the body
and its digestion and absorption.

28The local coverage policy considers a total caloric daily intake
(through parenteral, enteral and oral nutrition) of 20-35 calories per
kilogram per day sufficient to achieve or maintain appropriate body
weight.

29For purposes of this survey, we used Medicare's coverage standards for
parenteral nutrition therapy as a basis for developing questions about the
state Medicaid programs' coverage standards. The primary Medicare coverage
standards for parenteral nutrition therapy that we identified are as
follows: (1) Patient has to have a severe pathology of the
gastrointestinal tract that does not allow absorption of sufficient
nutrients to maintain weight and strength; (2) Patient has to have a
permanent impairment of the gastrointestinal tract, i.e., lasting at least
3 months; (3) The patient's maintenance of weight and strength needs to be
through intravenous nutrition only; (4) Other therapies-such as enteral
nutrition and medication-need to have failed in order for the state to
cover parenteral nutrition; (5) Patient must have a specific clinical
condition to qualify for coverage of parenteral nutrition; and (6)
Specific documentation-such as proof of medical condition, duration of
gastrointestinal impairment, or list of medications used-has to be
indicated in the patient's medical record.

Medicare and Medicaid Coverage Standards for Enteral Nutrition

Medicare and Medicaid Coverage Standards for Ostomy Care

30For purposes of this survey, we used Medicare's five coverage standards
for enteral nutrition therapy as a basis for developing questions about
the state Medicaid programs' coverage standards. The primary Medicare
coverage standards for enteral nutrition therapy that we identified are as
follows: (1) Patient has to have a pathology or non-function of the
structures that normally permit food to reach the small bowel (e.g.,
inability to swallow), which impairs the ability to maintain weight and
strength; (2) The impairment has to be considered a permanent condition,
(i.e., lasting at least 3 months); (3) Patient's condition must
necessitate tube feedings to provide sufficient nutrients to maintain
weight and strength (i.e., patient must be unable to obtain adequate
nutrition through dietary adjustment and/or oral supplements); (4) Enteral
nutrition for patients with partial impairments (e.g., Crohn's disease
patient who requires prolonged infusion of enteral nutrients to overcome
an absorption problem) is possible; and (5) Specific documentation has to
be provided in the patient's medical record. In addition, although
Medicare does not cover enteral nutrition products that are administered
orally, we asked states whether they have established a sixth standard by
covering such products and related supplies.

Medicare and Medicaid Coverage Standards for Medically Necessary Food Products

31Under the home health benefit, Medicare pays for services provided to
homebound beneficiaries by a home health agency under the care of a
physician. Covered items and services under this benefit include physical
therapy, medical supplies, and durable medical equipment as long as they
are medically necessary.

32In addition, the NCD for parenteral and enteral nutrition specifically
excludes "nutritional supplementation" from coverage.

33For purposes of this survey, states were asked to respond to three
coverage standards as summarized from discussions with health experts and
our review of relevant literature as follows: (1) medically necessary food
products are covered if they are an essential source of nutrition; (2)
medically necessary food products are covered only for specific
conditions; and (3) medically necessary food products are covered only
during the period following hospitalization.

Medicare and Medicaid Coverage Standards for Drugs to Treat IBD

34Specifically, outpatient drugs and biologicals are covered when they are
furnished incident to a physician's professional service, provided that
they are not usually self-administered by the patient. See 42 U.S.C. S:
1395x(s)(2)(A). Therefore, medications used to treat IBD therapy that are
self-administered are not covered by Medicare, but those administered by a
physician in a clinical setting may be covered as long as they are "not
usually self-administered." CMS has published a general policy for
determining whether a drug meets these statutory requirements, but the
ultimate decision on a particular drug is made by each Medicare claims
administration contractor. Of the drugs and biologicals used to treat IBD,
only one would likely be considered "not usually self-administered" under
CMS guidelines-Remicade-because it is given intravenously. We did not
survey the Medicare claims administration contractors to determine whether
each has issued coverage policies on Remicade.

35Medicare Prescription Drug, Improvement, and Modernization, Act, Pub. L.
No. 108-173, S: 101, 117 Stat. 2066, 2071-2152 (codified at 42 U.S.C. S:S:
1395w-101 to 1395w-152).

36Under the new prescription drug benefit, private plans will contract
with Medicare to provide drug coverage for Medicare beneficiaries. In
general, outpatient prescription drugs will be covered if the drug is
either (1) on the specific plan's formulary, or (2) determined to be
medically necessary. The medically necessary determination is made through
Medicare's exception/appeals process, which requires the plan to cover any
drug that is considered medically necessary for the beneficiary even if it
is not on the plan's formulary. CMS has also indicated that the drug plans
may cover off-label uses of drugs, if they are prescribed for medically
accepted indications; but they are not required to do so.

Variation in Medicare and Medicaid Programs' Coverage of Specific Supplies
                            Related to IBD Therapies

Parenteral Nutrition Supplies Covered by Medicare and Medicaid

37A certificate of medical necessity is required for Medicare
reimbursement for 14 types of durable medical equipment and supplies. This
form, which should be personally signed by the treating physician or
midlevel practitioner-i.e., a nurse practitioner or physician assistant
trained to provide medical assistance that otherwise might be performed by
a physician-to attest to the accuracy of the information contained on the
form, documents medical necessity.

38Based on the clinical condition involved, there may also be other
documentation requirements for parenteral nutrition therapy, such as
evidence of malnutrition, a failed tube feeding trial, attempts to feed
orally or enterally, and caloric intake and output. It may also be
necessary to provide reports of small bowel motility studies, a list of
medications used to treat certain conditions, and laboratory data such as
a fecal fat test documenting malabsorption.

                                        Adults                  Children
                                  Home                    Home     
Supplies                     health Outpatient       health Outpatient
Parenteral nutrition                                                   
solution                                    34      42          35  44
Parenteral nutrition                                                   
supply kit                                  35      43          36  44
Parenteral nutrition                                                   
administration kit                          36      45          37  46
Parenteral nutrition                                                   
infusion pump                               40      46          40  47
Intravenous pole                            39      43          40  45 

Enteral Nutrition Supplies Covered by Medicare and Medicaid

39For special formulas, the medical necessity will need to be justified
for each patient. Otherwise, Medicare payment will be based on the
allowance for the least costly medically appropriate alternative.

                                        Adults                   Children
                                                           Home     
Supplies                 Home health Outpatient       health Outpatient
Enteral formula                              35      42          37  44 
Enteral feeding supply                                                  
kit                                          40      45          43  46
Tubing                                       41      43          42  46 
Additive for enteral                                                    
formula                                      22      28          24  30
Enteral nutrition                                                       
infusion pump                                38      40          40  42
Intravenous pole                             38      40          40  42 
Percutaneous                                                            
catheter/tube                                30      33          31  38

Ostomy Supplies Covered by Medicare and Medicaid

40Skin barriers are used to protect the skin around the stoma and to
increase overall wear time.

41DMERCs have established usual maximum quantities of supplies for those
ostomy supplies that are most commonly used because more claims data exist
on these supplies and because there is a greater risk of overutilization.

42The quantity and type of supplies needed by a patient is determined to a
great extent by the type of ostomy, its location, its construction, and
the condition of the skin surface surrounding the stoma. There will be
variation according to individual patient need as well individual needs
over time.

43A United Ostomy Association survey of Medicare beneficiaries conducted
in late 2004 showed that 45 percent of the respondents had received some
kind of home health care during a recent 3-year period.

44According to the United Ostomy Association, almost two-thirds of the
individuals who have ostomies and are receiving home care services, are
receiving these services for reasons unrelated to their ostomy.

45The Balanced Budget Act of 1997 mandated the implementation of the
prospective payment system for home health agencies. Pub. L. No. 105-33,
S: 4603(a), 111 Stat. 251, 467-72. Under this system, home health agencies
receive a single payment, adjusted to reflect the care needs of the
patient, for delivering up to 60 days of care, called a home health
episode. This episode payment is based on the historical national average
cost of providing care, not on a home health agency's actual costs of
treating any given patient. The episode payment is intended to cover the
average costs of all home health visits and medical supplies provided
during the episode.

46We previously reported that, although Medicare's home health payment
includes the average costs of nonroutine medical supplies, including
ostomy supplies, this payment may not reflect variation in supply costs
across types of patients. Home health agencies may be paid the same amount
for treating patients with quite different supply costs. Patients who
require costly supplies may have problems accessing home health care, may
have to switch supplies, or have a limited number of supplies provided to
them during their period of home care. In addition, the agencies that
treat them may be financially disadvantaged. See GAO: Medicare Home Health
Payment: Nonroutine Medical Supply Data Needed to Assess Payment
Adjustments, GAO-03-878 (Washington, D.C., August 15, 2003.)

                               Median percent of                        
                               states that cover      Median percent of 
                                supplies in each      states that cover 
                                category in home       supplies in each 
Ostomy categories             health delivery category in outpatient 
(number of supplies)                 settings      delivery settings
Drainable pouch with                                                 
extended wear barrier                         
supplies (2 supplies)                      84                     88
Drainable pouch with                                                 
standard barrier                              
supplies (14 supplies)                     84                     85
Irrigation supplies (6                                               
supplies)                                  82                     84
Fluid discharge                                                      
management item (1                            
item)                                      75                     75
Adhering pouch barrier                                               
supplies (2 supplies)                      85                     90
Extended wear barrier                                                
supplies (5 supplies)                      84                     86
Barrier-skin                                                         
protection supplies                           
(13 supplies)                              86                     88
Closed pouch supplies                                                
(11 supplies)                              84                     88
Other accessories (15                                                
supplies)                                  80                     82

Medically Necessary Food Products Covered by Medicaid

                                                 Baby food and          
            Prescription        Oral                     other          
                strength nutritional       Food    blenderized    Other
                vitamins    formulas thickeners       products products
Adults                                                               
and                                                         
children           29          36         28              2       12
Children                                                             
only                6           7          5              2        5
Neither                                                              
adults                                                      
nor                                                         
children           16           8         18             47       34
Total              51          51         51             51       51 

Drugs Covered by Medicaid to Treat IBD

Figure 1: Number of State Medicaid Programs That Reported Covering Drugs
Listed in Our Survey to Treat IBD

47Forty-eight survey respondents reported that their states would cover
the brand name drug Remicade. One state-Ohio-wrote that it would cover the
drug with prior authorization. The remaining two states-California and
Iowa-indicated that they would not cover the drug without prior
authorization. Based on these responses, we concluded that all states
would cover the drug.

Further analysis revealed that six states-Colorado, Minnesota, Montana,
Nevada, Oklahoma, and Wisconsin-reported that individuals must use generic
drugs if they are available, before obtaining the equivalent, but more
expensive brand name drugs. Three states-California, Iowa, and
Ohio-indicated that they would not cover the brand name drug Remicade
without prior authorizations. See app. XI for a listing of each state's
coverage of drugs listed in our survey to treat IBD for adults and
children.

                                Agency Comments

We provided a draft of this report to CMS. In its written comments, CMS
said that it determined that we correctly described the Medicare coverage
policies for parenteral and enteral nutrition and ostomy supplies.
However, CMS suggested that we clarify our description of Medicare's
coverage policy for prescription drugs that are not self-administered. We
revised our language to address this concern. It also said that, as it
proceeds with policy development, it will continue to give consideration
to access issues that affect Medicare beneficiaries and Medicaid
recipients in their treatment of IBD. We have reprinted CMS's letter in
app. XII.

We also provided FDA with excerpts of the draft concerning drugs it has
approved to treat Crohn's disease and ulcerative colitis. FDA responded by
e-mail and provided a list that contained several additional drugs it said
it considered as valid, labeled, treatments for IBD. FDA's revised list
was provided after our survey was administered and these drugs are not
discussed in this report. We modified our report to note this.

We are sending copies of this report to the Secretary of Health and Human
Services, the Administrator of CMS, the Commissioner of FDA, and other
interested parties. In addition, this report will be available at no
charge on GAO's Web site at http://www.gao.gov. We will also make copies
available to others upon request.

If you or your staffs have any questions about this report, please contact
me at (312) 220-7600 or [email protected]. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report are listed in app.
XIII.

Leslie G. Aronovitz Director, Health Care

Appendix I: S  Appendix I: Scope and Methodology

In this report, we (1) identify the Medicare and Medicaid coverage
standards for five therapies-parenteral nutrition, enteral nutrition
formula, ostomy care, medically necessary food products, and drugs
approved by the Food and Drug Administration (FDA) for inflammatory bowel
disease (IBD); and (2) determine what specific supplies used in these
therapies Medicare and state Medicaid programs pay for in home health and
outpatient delivery settings. In examining Medicare and Medicaid coverage
of these therapies and the related supplies, we considered whether each
program would cover these items in both home health and outpatient
settings. For purposes of this study, we defined these settings as
follows:

           o  Home health care refers to the situation in which a medical
           supply is being provided to the individual by a home health aide
           or others through an arrangement made by a home health agency, in
           accordance with a plan for furnishing the supply that a physician
           has established and periodically reviews. The supply is provided
           through visits made to an individual's residence.

           o  Outpatient care refers to any situation in which a patient
           receives a medical supply but does not require an overnight
           hospital stay. This includes a situation in which the supply is
           provided to the individual during a visit with a physician in an
           office or hospital. It may include a situation in which the
           individual obtains and self-administers the supply outside of the
           office or hospital setting, without the assistance of a home
           health aide or a home health agency.

           To identify Medicare's coverage standards for parenteral and
           enteral nutrition, ostomy care, medically necessary food products,
           and drugs approved by the FDA for the treatment of IBD in home
           health and outpatient delivery settings, we reviewed the standards
           established by the Centers for Medicare & Medicaid Services (CMS)
           in its national coverage policies. Specifically, we examined CMS's
           database of national coverage determinations (NCD) as well as its
           interpretive manuals, which address coverage policies. We also
           reviewed local coverage policies established by CMS's four Durable
           Medical Equipment Regional Carriers (DMERC). In addition, we
           reviewed relevant Medicare laws and regulations. To clarify our
           understanding of these materials, we interviewed CMS officials and
           the medical directors of the four DMERCs. We also reviewed
           relevant laws, and other CMS and DMERC documentation to determine
           if the program covers these therapies in both the home health and
           outpatient delivery settings.

           To identify the Medicaid program's coverage standards in each
           state for the five therapies addressed by our study in home health
           and outpatient delivery settings, we sent a survey to Medicaid
           offices in the 50 states and the District of Columbia. The survey
           addressed each state's coverage policies and medical criteria that
           an individual must meet to receive each of the five therapies as a
           Medicaid benefit. Specifically, we asked states to indicate
           whether their program provides coverage of each of the five
           therapies and the criteria and conditions they have established,
           if applicable. In general, we used Medicare's coverage policies as
           a basis for the survey's coverage questions, and we provided
           states the opportunity to describe how their policies varied from
           Medicare's policies. We also provided states with the option of
           describing other pertinent criteria they may have established. The
           survey asked them to indicate whether they had different coverage
           policies for adults and children for such therapies. Because
           Medicare does not cover medically necessary food products and
           self-administered prescription medications, we formulated our
           survey questions on applicable coverage standards for these two
           items based on discussions with medical experts and organizations
           that represent IBD patients, and our review of pertinent
           literature. Regarding drugs used to treat IBD, we consulted with
           the FDA, which provided us with a list of nine brand name drugs
           and two generic drugs that it had approved to treat Crohn's
           disease and ulcerative colitis. We included these drugs in our
           survey.1

           We pretested our survey with Medicaid officials in the District of
           Columbia, Georgia, and Virginia. We selected the District of
           Columbia and Georgia because of the contrasting sizes of these two
           Medicaid programs. We selected Virginia to obtain additional input
           on the structure of our questions related to prescription drug
           coverage. We received responses from all of the states and
           reviewed these data for obvious inconsistency errors and
           completeness. For responses that were unclear or incomplete, we
           contacted survey respondents to obtain clarification before
           conducting our analyses. We did not verify all the information we
           received in the survey. When necessary, we compared our electronic
           data files of survey responses with the actual surveys we obtained
           from states. We also did several internal verification checks to
           ensure accuracy. Based on these efforts, we determined that the
           data were sufficiently reliable for the purposes of this report.

           To improve our understanding of how Medicare's and Medicaid's
           coverage standards apply to the five therapies, we also reviewed
           pertinent literature, interviewed two physicians who are regarded
           as experts in the field of gastrointestinal diseases, and convened
           a panel consisting of representatives of organizations that study
           or serve the needs of IBD patients. The following organizations
           participated in this panel:

           o  American Society for Parenteral and Enteral Nutrition
           o  American Gastroenterological Association
           o  Coram Healthcare (provider of home infusion services)
           o  Crohn's Disease and Colitis Foundation of America
           o  Digestive Disease National Coalition
           o  North American Society for Pediatric Gastroenterology,
           Hepatology, and Nutrition
           o  The Oley Foundation for Home Parenteral and Enteral Nutrition
           o  United Ostomy Association2

           To identify the specific supplies used in the covered therapies
           that Medicare will pay for, we reviewed relevant NCDs, local
           coverage policies, and CMS interpretive manuals. We interviewed
           CMS officials and the four DMERC directors about the supplies that
           Medicare will pay for, and any applicable limitations or
           restrictions. To improve our understanding of the various supplies
           used in each therapy, we obtained information from the two medical
           experts and representatives of organizations that participated in
           our panel.

           To determine the specific supplies that state Medicaid programs
           will pay for, we provided in our survey a list of commonly used
           supplies for each of the five therapies. To determine the supplies
           that are most commonly used in the five therapies, we interviewed
           the directors of the four DMERCs, representatives of some of the
           organizations that participated in our panel, and the two medical
           experts, and reviewed relevant literature. States were asked to
           report whether or not the specific supplies listed were covered
           for adults and children, and whether their Medicaid program would
           cover these supplies in both home health and outpatient delivery
           settings. In the case of parenteral and enteral nutrition, and
           ostomy supplies, we listed items by name and included their
           identifying codes as specified in the Health Care Common Procedure
           Coding System (HCPCS).3 Because there is no standard definition of
           what constitutes medically necessary food products, we developed a
           list of items that members of our panel and the physicians we
           spoke to generally considered commonly used. To determine whether
           states covered medications to treat IBD, we asked states to
           indicate whether they paid for the nine brand name drugs and two
           generic drugs listed in our survey. With the exception of drugs,
           we asked states to indicate whether they had established any
           restrictions, including supply limits and monetary caps, on the
           provision of covered products. We conducted our work from December
           2004 through November 2005, in accordance with generally accepted
           government auditing standards.

           aFor purposes of this analysis, we are defining coverage as any
           state that covers at least one of the brand name drugs or generic
           equivalent drugs listed in our survey for adults or children.

           bOnly total parenteral nutrition is covered.

           aPatient has to have a severe pathology of the gastrointestinal
           tract that does not allow absorption of sufficient nutrients to
           maintain weight and strength.

           bPatient has to have a permanent impairment of the
           gastrointestinal tract, i.e., lasting at least 3 months.

           cThe patient's maintenance of weight and strength needs to be
           through intravenous nutrition only.

           dOther therapies-such as enteral nutrition and medication-need to
           have failed in order for the state to cover parenteral nutrition.

           ePatient must have a specific clinical condition in order to
           qualify for coverage of parenteral nutrition.

           fSpecific documentation-such as proof of medical condition,
           duration of gastrointestinal impairment, and list of medications
           used-has to be provided in the patients' medical record.

           gFor acute care adults receiving total parenteral nutrition,
           parenteral nutrition therapy must be the sole source of nutrition.

           hOnly total parenteral nutrition is covered. Individuals must
           document the reason enteral feeding cannot be given.

           iThe coverage standards related to partial impairment and clinical
           conditions are not mandatory. A state official reported that the
           state generally tries to follow these standards.

           jThe coverage standards related to pathology and clinical
           conditions are only applicable in home health delivery settings.

           kThe recipient must require total parenteral nutrition to sustain
           life. Adequate nutrition must not be possible by dietary
           adjustment, oral supplements, or tube enteral nutrition.

           lParenteral nutrition therapy must be the primary source of
           nutrition.

           aPatient has to have a severe pathology or non-function of the
           structures that normally permit food to reach the small bowel
           (e.g., inability to swallow), which impairs the ability to
           maintain weight and strength.

           bThe impairment has to be considered a permanent condition, i.e.,
           lasting at least 3 months.

           cThe patient's condition must necessitate tube feedings to provide
           sufficient nutrients to maintain weight and strength (i.e.,
           patient must be unable to obtain adequate nutrition through
           dietary adjustment and/or oral supplements).

           dEnteral nutrition for patients with partial impairments (e.g.,
           Crohn's disease patient who requires prolonged infusion of enteral
           nutrients to overcome an absorption problem) is possible.

           eThe state covers enteral nutrition products, and related
           supplies, that are administered orally.

           fSpecific documentation related to enteral nutrition therapy has
           to be provided in the patients' medical record.

           gFor acute care adult patients, enteral therapy must be the sole
           source of nutrition.

           hFor adults, enteral nutrition is covered only if it is the sole
           source of nutrition.

           iFor adults and children, enteral nutrition must provide 51
           percent of more of caloric intake.

           jFor adults, the tube feeding criterion is only applicable in home
           health delivery settings.

           kThe state does not require documentation for adults. It did not
           respond to this question for children.

           lEnteral nutrition therapy must be the primary source of
           nutrition. The state may cover oral nutritional products for
           children who have had an early and periodic screening, diagnostic,
           and treatment screening which results in a diagnosed condition
           that impairs absorption of specific nutrients.

           mDocumentation must indicate that there is a defined pathologic
           process for which nutritional support is therapeutic.

           nThe state only covers this therapy for children.

           oTube feeding coverage standard is to sustain life rather than to
           maintain weight and strength.

           aMedically necessary food products must be an essential source of
           nutrition.

           bMedically necessary food products are covered only for specific
           conditions.

           cMedically necessary food products are covered only during the
           period following hospitalization.

           dFor acute care adult patients, medically necessary food products
           must be the sole source of nutrition.

           eThe state covers medically necessary food products for certain
           inherited metabolic diseases.

           fThe state covers medically necessary food products if products
           are necessary to provide sufficient nutrients to maintain weight
           and strength commensurate with patient's overall health status.

           gTo receive coverage, a patient must have a defined and specific
           pathologic condition for which nutritional support is therapeutic.
           If the purpose is simply to provide food, then it is not
           considered medically necessary.

           hNutritional therapy must be the sole source of nutrition.

           aParenteral nutrition solution includes all types of solutions.

           bParenteral nutrition supply kit which can be premixed or mixed at
           home.

           c Parenteral nutrition infusion pump can be portable or
           stationary.

           dSupplies are covered only when administered at home. They are not
           covered in other outpatient delivery settings.

           aEnteral formula includes all types.

           bEnteral feeding supply kit includes the syringe, pump, and
           gravity fed.

           cTubing includes all types including nasogastric, stomach, and
           gastrostomy.

           dAdditives for enteral formula.

           eEnteral nutrition includes infusion pump with or without an
           alarm.

           fCatheter includes percutaneous catheter, tube anchoring device
           and adhesive skin attachment.

           gState's coverage is limited to home health delivery settings.

           hThe state does not cover enteral nutrition infusion pump -
           without alarm.

           iThe state does not cover blenderized enteral formulas.

           jFor adults, the state handles coverage for enteral supplies on a
           case-by-case basis.

           kThe state only covers specific enteral nutrition supplies.
           Nasogastric tubings with and without stylets along with stomach
           tubes are only covered for children.

           lPediatric enteral formula and blenderized enteral formula are
           only covered for children under the age of 21.

           mThe state does not cover all enteral formulas.

           Source: GAO survey of state Medicaid programs.

           aOstomy supplies were placed in related categories based on
           discussions with an official from the United Ostomy Association.

           Source: GAO survey of state Medicaid programs.

           Note: Responses for percent of monetary caps or supply limits may
           exceed 100 percent due to rounding.

           aSupplies are only covered if they are used at home. Dollar caps
           and supply limits only apply to adults.

           bThe state has supply limits and dollar caps that can never be
           exceeded for certain supplies; however some of the limits and caps
           are very high. For example, for one item that can never be
           exceeded-the ostomy belt with peristomal hernia support-the state
           reported that it will pay for up to 999 belts and $38,571.39 per
           month.

           cThere are no supply limits or dollar caps for home health ostomy
           supplies.

           dSupply limits or dollar caps are only for home health.

           eOnce the accumulated dollar value of all products reaches $300 or
           more in a year, the state looks at the usage patterns and other
           information. The state reported that IBD patients often reach or
           exceed the $300 limit but it often allows individuals to exceed
           the amount with written justification.

           aFor prescription strength vitamins, the state covers prenatal
           vitamins for pregnant women only. Prescription fluoride vitamins
           are covered for children up to eight years of age.

           bThe state only covers prenatal vitamins. Food thickeners are
           covered for any condition, as long as they are medically
           necessary.

           cFor prescription strength vitamins, the state limits coverage to
           prenatal vitamins, folic acid, pediatric vitamins with fluoride
           for children less than 13 years of age, multivitamins for dialysis
           patients, and iron supplements.

           dThe state covers special metabolic formulas for oral
           administration for children under medically necessary food
           products.

           eFor prescription strength vitamins, multivitamins can be covered
           but they must have prior authorization and meet the state's
           criteria for medically necessary.

           fCoverage for prescription strength vitamins is based on
           documented vitamin deficiencies in the patient's medical record.
           Nutritional formulas taken orally must have prior authorization.

           gCMS standard exemptions related to legend vitamins are covered.
           Pediatric vitamin supplements with fluoride are covered. Other
           pediatric legend vitamins may be covered with statement of medical
           necessity.

           hThe state requires a defined/specific pathologic condition for
           which nutritional support is therapeutic. If the purpose of the
           supply is simply to provide food, then it is not considered
           medically necessary.

           iThe state covers general nutritional supplements. Other disease
           specific products are not covered.

           jFor prescription strength vitamins, the state limits coverage for
           children less than two years of age or for prenatal use.

           kFor prescription strength vitamins, the state covers prenatal
           vitamins for women.

           lThe state does not cover nutritional shakes and vitamins.

           aThe state requires patients to use a generic equivalent drug, if
           available.

           bThe state covers brand name drugs only after documentation of
           medical necessity is complete. The documentation has to include a
           summary of benefit versus risk.

           cThe state will cover brand name drugs with prior authorization
           when there are generic equivalent drugs available.

           dThe state does not cover Remicade, Colozal, and Entocort for
           children age 11 or under.

           eThe state requires prior authorization for Remicade and Asacol.

           fThe state did not indicate whether it covered the generic drug
           for Azulfidine for children.

           gThe state will pay for brand name drugs after demonstrating
           failure of generic equivalent drugs.

           hThe state will cover brand name drugs with prior authorization
           when there are generic equivalent drugs available.

           iThe state requires prior authorization for Remicade.

           jThe state requires patients to use a generic equivalent drug, if
           available.

           kThe state may require prior authorization if generic equivalent
           drug or therapeutic alternatives exist.

           lThe state requires prior authorization for brand name drugs when
           there is a generic equivalent drug available.

           mThe state will cover brand name drugs with prior authorization
           when there are generic equivalent drugs available.

           Leslie G. Aronovitz (312) 220-7600 or [email protected]

           In addition to the contact named above, Geraldine Redican-Bigott,
           Assistant Director; Shaunessye Curry; Adrienne Griffin; Ba Lin;
           Janet Rosenblad; and Pauline Seretakis made key contributions to
           this report.

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Medicare and Medicaid's Coverage Standards of IBD Therapies

1The nine brand name drugs listed in our survey were Asacol, Azulfidine,
Canasa, Colazal, Dipentum, Entocort, Pentasa, Remicade, and Rowasa. The
survey also listed the generic equivalents of two of these drugs,
Azulfidine and Rowasa. After we administered our survey, the FDA informed
us that it also considers several additional drugs as valid treatments for
IBD. These drugs are not discussed in this report.

Specific Supplies Paid for by Medicare and State Medicaid Programs

2The United Ostomy Association permanently ceased operations on September
30, 2005.

3HCPCS was developed by CMS to standardize coding systems used to process
Medicare claims for medical services and procedures furnished by
physicians and other health care professionals, as well as other medical
products, supplies, and services.

Appendix II: ReProgram CoPatients  Appendix II: Reported State Medicaid
Program Coverage of Therapies Used by IBD Patients

Appendix III: Reported ParentTherapy CoMedi  Appendix III: Reported
Parenteral Nutrition Therapy Coverage Standards by State Medicaid Program

Appendix IV: RTherapy CoMedi  Appendix IV: Reported Enteral Nutrition
Therapy Coverage Standards by State Medicaid Program

Appendix V: Re Food Products Medi  Appendix V: Reported Medically
Necessary Food Products Coverage Standards by State Medicaid Program

Appendix VI: RSupplies Coverand O  Appendix VI: Reported Parenteral
Nutrition Supplies Covered by Medicaid in Home Health and Outpatient
Delivery Settings

Appendix VII: Supplies Coverand O  Appendix VII: Reported Enteral
Nutrition Supplies Covered by Medicaid in Home Health and Outpatient
Delivery Settings

Appendix VIII: Reported Percent of States Covering Ostomy Supplies in Home
Health and Outpatient Delivery Settings  Appendix VIII: Reported Percent
of States Covering Ostomy Supplies in Home Health and Outpatient Delivery
Settings

                                              Home health Outpatient delivery 
Supplya name                          delivery setting             setting 
Drainable pouch with extended wear                     
barrier                                                
Ostomy pouch, drainable, with                                              
extended wear barrier attached                      84                  88
Ostomy pouch, drainable, with                                              
extended wear barrier attached, with                   
built-in convexity                                  84                  88
Drainable pouch - standard barrier                     
Ostomy pouch, drainable with                                               
faceplate attached, plastic                         84                  90
Ostomy pouch, drainable with                                               
faceplate attached, rubber                          84                  90
Ostomy pouch, drainable, for use on                                        
faceplate, plastic                                  84                  90
Ostomy pouch, drainable, for use on                                        
faceplate, rubber                                   84                  86
Ostomy pouch, drainable, with barrier               84                  88 
Ostomy pouch, drainable, high output,                                      
for use on a barrier with flange (2                    
piece system), with filter                          80                  82
Ostomy pouch, closed, for use on                                           
barrier with locking flange, with                      
filter (2 pieces)                                   80                  84
Ostomy pouch, drainable, with barrier                                      
attached, with filter (1 piece)                     80                  84
Ostomy pouch, drainable, for use on                                        
barrier with non-locking flange, with                  
filter (2 pieces)                                   80                  84
Ostomy pouch, drainable, for use on                                        
barrier with locking flange (2                         
pieces)                                             80                  84
Ostomy pouch, drainable, for use on                                        
barrier with locking flange, with                      
filter (2 pieces)                                   78                  82
Ostomy pouch, drainable, without                                           
barrier attached (1 piece)                          86                  84
Ostomy pouch, drainable with barrier                                       
attached (1 piece)                                  88                  88
Ostomy pouch, drainable, for use on                                        
barrier with flange (2 piece system)                90                  90
Irrigation supply                                      
Irrigation supply; sleeve                           82                  86 
Ostomy irrigation supply; bag                       78                  82 
Ostomy irrigation supply;                                                  
cone/catheter, including brush                      80                  86
Lubricant                                           82                  84 
Continent device, plug for continent                                       
stoma                                               82                  84
Continent device, catheter for                                             
continent stoma                                     82                  84
Fluid discharge management                             
Bedside drainage bottle                             75                  75 
Barrier with adhering pouch                            
Ostomy barrier, with flange, with                                          
built-in convexity                                  84                  92
Ostomy skin barrier, with flange,                                          
without built-in convexity, 4x4                        
inches or smaller                                   86                  88
Barrier - extended wear                                
Ostomy skin barrier, solid 4x4                                             
inches, extended wear, without                         
built-in convexity                                  84                  88
Ostomy skin barrier, with flange,                                          
extended wear, with built-in                           
convexity, 4x4 inches or smaller                    88                  88
Ostomy skin barrier, with flange,                                          
extended wear with built-in                            
convexity, larger than 4x4 inches                   84                  86
Ostomy skin barrier, with flange,                                          
extended wear, without built-in                        
convexity, 4x4 inches or smaller                    84                  86
Ostomy skin barrier, with flange,                                          
extended wear, without built-in                        
convexity, larger than 4x4 inches                   84                  86
Barrier skin protection                                
Skin barrier, solid; 4x4 inches                     86                  92 
Adhesive, liquid                                    90                  92 
Ostomy skin barrier, liquid                         88                  94 
Ostomy skin barrier, powder                         88                  94 
Ostomy barrier, solid                               84                  90 
Ostomy faceplate equivalent, silicone                                      
ring                                                82                  86
Ostomy ring                                         88                  92 
Ostomy skin barrier, non-pectin                                            
based, paste                                        86                  88
Ostomy skin barrier, pectin-based                                          
paste                                               86                  84
Skin barrier, wipes, box of 50                      86                  86 
Skin barrier, solid, 6x6 inches                     88                  86 
Skin barrier, solid, 8x8 inches                     86                  86 
Adhesive or non-adhesive, disk or                                          
foam pad                                            86                  86
Closed pouch                                           
Ostomy skin barrier, closed, with                                          
extended wear barrier attached, with                   
built-in convexity                                  84                  88
Ostomy pouch, closed, with barrier,                                        
with filter                                         80                  84
Ostomy pouch, closed, with barrier                                         
attached, with built-in convexity                   80                  84
Ostomy pouch, closed, without                                              
barrier, with filter (1 piece)                      80                  84
Ostomy pouch, closed, fuse use on                                          
barrier with non-locking flange (2                     
pieces)                                             78                  82
Ostomy pouch, closed, fuse use on                                          
barrier with locking flange (2                         
pieces)                                             77                  80
Ostomy pouch, closed, with barrier                                         
attached                                            88                  92
Ostomy pouch, closed, without barrier                                      
attached                                            90                  90
Ostomy pouch, closed, for use on                                           
faceplate                                           86                  90
Ostomy pouch, closed, for use on                                           
barrier with flange                                 90                  92
Stoma cap                                           86                  92 
Other accessories                                      
Ostomy faceplate                                    84                  88 
Adhesive remover wipes                              82                  80 
Ostomy vent                                         73                  80 
Ostomy belt                                         88                  92 
Ostomy belt with peristomal hernia                                         
support                                             75                  80
Ostomy filter                                       75                  82 
Ostomy deodorant, liquid                            73                  78 
Ostomy deodorant, solid                             73                  77 
Ostomy supply, miscellaneous                        80                  84 
Ostomy absorbent material for use in                                       
ostomy pouch to thicken liquid stomal                  
output                                              73                  75
Tape, non-waterproof                                88                  86 
Tape, waterproof                                    88                  86 
Adhesive remover or solvent                         86                  90 
Ostomy accessory, convex insert                     82                  84 
Appliance cleaner, incontinence and                                        
ostomy appliances                                   75                  77

Appendix IX: Reported Information on Medicaid Coverage of Ostomy Supplies
and Related Limits  Appendix IX: Reported Information on Medicaid Coverage
of Ostomy Supplies and Related Limits

                            Percent                  
                                 of                  
                            covered    Percent of    
                   Number  supplies  dollar caps or  
                     of        with  supply limits   
                  supplies   dollar     that are     
                  covered      caps    exceeded:     
                             and/or                                        
                      Home   supply                                     No 
State            health   limits Outpatient Often Rarely Never response 
Alabama              14        8               20      0     0      100  0
Alaska               69       69               81      0   100        0  0
Arizona              69       69              100     26    23       51  0
Arkansasa            54       54               78      0     0      100  0
California           60       59               15     90     0        0 10
Colorado             69       69                0      0     0        0  0
Connecticut          64        0               93      0    98        0  2
Delaware             69       69               96      0   100        0  0
District of                                                              
Columbia              0       69              100     55    38        7  0
Florida              65       66               96      0    99        0  2
Georgia               0       17               25      0   100        0  0
Hawaii               69       69              100    100     0        0  0
Idahob               69       69              100      0    44       57  0
Illinois              0       68               99      2    99        0  0
Indiana              69       69                0      0     0        0  0
Iowa                 69       69               96      0    99        2  0
Kansas               57       57               83      0     0      100  0
Kentuckyc            69       68               55    100     0        0  0
Louisiana            63       63               65      0   100        0  0
Maine                69       69                0      0     0        0  0
Maryland             69       69                0      0     0        0  0
Massachusetts        67       55               97      0   100        0  0
Michigan             63       63               91      0   100        0  0
Minnesota            69       47              100      0    29       71  0
Mississippi          67       67               97      0   100        0  0
Missouri             69       68               46      0   100        0  0
Montana              69       69              100      0   100        0  0
Nebraska             69       69              100      0    99        0  1
Nevadad              69       69               42      0   100        0  0
New Hampshire        69       69                0      0     0        0  0
New Jersey            0       68               12      0   100        0  0
New Mexico            0       69               96      0     0      100  0
New York             69       69                0      0     0        0  0
North Carolina       23        0                0      0     0        0  0
North Dakotae        69       69               96     99     0        2  0
Ohio                 52       52               74      0   100        0  0
Oklahoma             69       69               10      0     0      100  0
Oregon               68       68               99      0   100        0  0
Pennsylvania         57       58               45      0   100        0  0
Rhode Island         69       69              100    100     0        0  0
South Carolina       69       69               99      0    97        3  0
South Dakota         67       67                0      0     0        0  0
Tennessee            69       69                0      0     0        0  0
Texas                57        0               10     86     0        0 14
Utah                 35       35                6      0   100        0  0
Vermont              69       69                0      0     0        0  0
Virginia             69       69              100    100     0        0  0
Washington           68       68               65      9    76       16  0
West Virginia        69       69              100      0     0      100  0
Wisconsin            62       62               90      0   100        0  0
Wyoming              69       69                0      0     0        0  0

Appendix X: Re Food Products Program  Appendix X: Reported Medically
Necessary Food Products Covered by State Medicaid Program

Appendix XI: SSurveMedica  Appendix XI: Summary of Drugs Listed in Our
Survey to Treat IBD That Are Covered by Medicaid for Adults and Children

Appendix XII: Comments from the Centers for Medicare & Medicaid Services 
Appendix XII: Comments from the Centers for Medicare & Medicaid Services

Appendix XIII:  Appendix XIII: GAO Contact and Staff Acknowledgments

                                  GAO Contact

                             Staff Acknowledgments

(290442)

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Highlights of GAO-06-63, a report to congressional committees

December 2005

MEDICARE AND MEDICAID COVERAGE

Therapies and Supplies for Inflammatory Bowel Disease

Inflammatory bowel disease (IBD) affects an estimated one million
Americans. IBD patients often have difficulty digesting food. As a result,
they may require parenteral nutrition (intravenous feeding) or enteral
nutrition (tube feeding), medically necessary food products to supplement
their diets, and medications. In addition, some IBD patients must care for
their ostomies-surgically created openings for the discharge of digested
food.

IBD advocates have recently expressed concerns regarding the ability of
IBD patients to obtain the health care they need. The Research Review Act
of 2004 directed GAO to study the Medicare and Medicaid coverage standards
for individuals with IBD, in both home health and outpatient delivery
settings. GAO (1) identified the Medicare and Medicaid coverage standards
for five key therapies used for the treatment of IBD and (2) determined
what specific supplies used in these therapies Medicare and Medicaid
programs will pay for. In this work, GAO examined Medicare's national and
local coverage policies and conducted a survey of Medicaid programs in the
50 states and the District of Columbia.

Medicare generally provides coverage for parenteral and enteral nutrition
and ostomy supplies in both home health and outpatient delivery settings.
However, specific standards regarding medical conditions and appropriate
documentation must be met for parenteral and enteral nutrition to be
covered. Medicare has one coverage standard governing the provision of
ostomy supplies-that beneficiaries receiving these items have had an
ostomy. Medicare does not cover medically necessary food products and
generally does not cover self-administered drugs, which include most drugs
taken by IBD patients. However, medically necessary drugs, including those
that are self-administered, will be covered by Medicare's voluntary
prescription drug benefit, which becomes effective in January 2006. State
Medicaid programs reported covering, at least partially, each of the five
therapies. The survey indicated that most states' Medicaid coverage
standards are generally comparable to Medicare's coverage for parenteral
and enteral nutrition and ostomy care.

State Medicaid Programs That Reported Coverage of Five IBD Therapies for
Adults and Children

    Parenteral   Enteral                                                      
     nutrition nutrition Ostomy care Medically necessary food products Drugsa

Source: GAO survey of state Medicaid programs.

Note: For purposes of this report, the District of Columbia is considered
a state.
aFor this analysis, GAO is defining states' coverage of drugs to treat IBD
as states' coverage of at least one of the brand name drugs or generic
drugs listed in GAO's survey.

Once Medicare coverage standards are met, the program will generally cover
all medically necessary supplies associated with parenteral and enteral
nutrition and ostomy care. The survey of state Medicaid programs showed
variation in the specific supplies that states will provide. While many
states pay for most supplies associated with parenteral and enteral
nutrition, the specific ostomy supplies states cover vary. Most
states-46-reported covering at least some medically necessary food
products. GAO also found that states generally cover the drugs listed in
the survey.

CMS said that GAO correctly described its Medicare coverage policies and
suggested that we clarify our description of Medicare's coverage policy
for prescription drugs that are not self-administered. It also said that
it will continue to consider access issues for Medicare and Medicaid IBD
patients.
*** End of document. ***