Cost estimates are based on estimations and assumptions derived from information submitted to the Council and information acquired during independent research. Estimates are based on the best available information. Any variation between these estimations and actual behavior and costs will cause a resulting variation in the cost. For example, if diabetics test their blood more often than estimated, the cost will increase. On the other hand, if insurance carriers negotiate rates for prescription medications (such as insulin) with pharmaceutical companies, the cost of some benefits may be lower.
Based on figures published by the Centers for Disease Control and Prevention and the American Diabetes Association, Council staff estimated that there are approximately 555,000 diagnosed diabetics in Pennsylvania in 1998. Of these, 255,000 are over age 65 and thereby qualify for Medicare benefits. However, one source estimated that 69% of the over age 65 population also have coverage through private health insurance. Of the under age 65 population of 300,000, approximately 14% are covered by Medicaid and 69% are covered by private insurance.
The benefits proposed in House Bill 656 would not cover the uninsured population (approximately 11.6% of the population), Medicare enrollees without private insurance coverage, and people who receive their health care benefits through employers which are ERISA exempt. House Bill 656 would affect only the privately insured population which are not ERISA exempt and Medicaid beneficiaries in managed care plans. In all, it was estimated that approximately 146,000 people under age 65 and 176,000 people over age 65 would qualify for the benefits mandated by House Bill 656.
For the purposes of this analysis, it was estimated that 7% of diabetics are Type 1 diabetics (10,220 people under age 65 and 12,320 people over age 65), and the remaining 93% are Type 2 diabetics (135,780 people under age 65 and 163,680 people over age 65).
All Type 1 diabetics use insulin (22,540 people). It was estimated that 40% of Type 2 diabetics use insulin (54,310 people under age 65 and 65,475 people over age 65) and that 40% of non-insulin using Type 2 diabetics use medications to treat their diabetes (32,590 people under age 65 and 39,285 people over age 65). It was further estimated that 10% of Type 1 diabetics and insulin using Type 2 diabetics also use medication to treat their diabetes (2,255 and 11,990 people, respectively).
It was assumed that Medicare would be used as the primary coverage and private insurance would be used as secondary coverage only for those benefits which Medicare will not cover.
Based on national figures from the American Diabetes Association, it was estimated that approximately 24,000 Pennsylvanians under age 65 will be diagnosed with diabetes every year and will be eligible for benefits under House Bill 656.
It was assumed that only newly diagnosed diabetics would require durable medical equipment such as blood glucose monitors and insulin pumps and an initial group education program.
Costs for the following supplies and services vary. Based on information submitted to the Council and acquired during staff research, the following cost of supplies was estimated to be at the mid-point of the price range:
Testing Supplies - Medicare provides coverage for these supplies, so figures here are for the under age 65 diabetic population. Following estimates used in other studies, staff estimated that insulin using diabetics (64,530 people) would test their blood on average two times a day (at a cost of $1.54 per day) and that 75% of non-insulin using diabetics (61,100 people) will test their blood once a day (at a cost of $0.77 per day). Staff assumed all of those who test their blood will require testing strips and lancets. It was also estimated that all newly diagnosed insulin using diabetics (10,610 people per year) and 75% of newly diagnosed non-insulin using diabetics (10,045 people per year) would require blood glucose monitors. Based on these estimations, it is estimated that the cost of the benefits for testing supplies to be approximately $54.7 million annually.
Insulin, Syringes, and Medications - Medicare does not cover the cost of insulin or medication, so those diabetics over age 65 with private insurance will also be eligible for this coverage. Staff estimated that Type 1 diabetics (22,540 people) will require a vial of insulin every 2 weeks (at a cost of $650 per year) and that Type 2 diabetics who use insulin (119,785 people) will require a vial of insulin every two months (at a cost of $150 per year). It was estimated that all insulin using diabetics will inject insulin twice a day, thereby requiring two syringes (at a cost of $.40 per day). Staff estimated that, on average, those diabetics requiring medication (86,120 people) will take one pill per day (at a cost of $6 per pill). Based on this, staff estimates that the cost for insulin and medications will be approximately $242 million annually.
Education/Nutrition - Staff assumed that all newly diagnosed diabetics (24,000 per year) would attend a group diabetes education program (at a cost of $150). Staff estimated that, on average, diabetics (146,000 people) will require one hour of one-on-one diabetes counseling every year (at a cost of $60) and one hour of nutritional counseling every year (at a cost of $50). Since Medicare covers the cost of education, it was estimated the those over age 65 with private insurance (176,000) would also be eligible for the nutritional counseling. Based on these estimates, the education/nutrition benefits proposed under House Bill 656 will cost approximately $28.5 million annually.
Orthotics - Medicare already provides coverage for custom shoes and inserts, so the figures presented here are for the under age 65 diabetic population. Staff estimated that 15% of diabetics (21,900 people) will require orthotics and that a person requiring orthotics would use one pair of custom shoes (at a cost of $500) and two pairs of inserts every year (at a cost of $140 per pair). Therefore, staff estimated that the cost of the orthotics benefit in House Bill 656 will be approximately $17.1 million annually.
Insulin Pumps - Staff estimated that 4% of newly diagnosed Type 1 diabetics (67 people per year) use an insulin pump (at a cost of $4,000 per pump). Based on this, the cost of providing insulin pumps will be about $270,000 annually.
Based on the above cost estimations, Council staff estimates that the total cost for the diabetes-related benefits proposed in House Bill 656 would cost approximately $342 million annually if no coverage presently existed.
Insurers already provide coverage for some of the benefits proposed in House Bill 656. For example, prescription drug riders will often cover the cost of insulin and medications. Durable medical equipment riders may already cover the cost of blood glucose monitors, testing strips, and/or insulin pumps. Some insurers already provide their enrollees with access to diabetes education programs and nutritional counseling. Therefore, the cost of mandating coverage for diabetic supplies, medication, and education will most likely be lower than $342 million. If one estimates that between 25 percent and 50 percent of diabetics already have access to the proposed benefits, the cost of mandating coverage is reduced. Therefore, we estimate that the cost of enacting the diabetes portion of House Bill 656 may cost between $171 and $256 million annually.
There is evidence that improved control of diabetes (which can be achieved through blood glucose monitoring, appropriate medication, and education) can reduce the number of diabetes-related hospitalizations and complications.
Using the Council's inpatient hospital discharge data, Council staff determined that over 262,000 diabetes-related hospitalizations occur each year. Hospital charges associated with these hospitalizations total almost $4.4 billion and encompass over 1.7 million days in the hospital. The average charge is approximately $17,000 per hospitalization, and the average length of stay is 6.5 days.
Decreased hospitalizations and fewer complications could result in an overall savings of health care dollars. There could be substantial savings if hospitalizations decreased by 20 percent a year, not an unrealistic figure based on a recent study by the Lewin Group which found that hospital admissions decreased 18 percent and hospital days decreased by 22 percent in the first year of a program aimed at examining health care needs for diabetics.
A 20 percent decrease in diabetes-related hospitalizations suggests:
A 20 percent decrease in hospitalizations for diabetes-related complications suggests:
From these calculations, self-management of diabetes has the potential to improve the quality of life for diabetics in Pennsylvania, and it has the potential to save health care dollars in the long term. While the estimated costs for the diabetes-related benefits proposed in House Bill 656 are high (ranging from $171 to $256 million annually) approximately $877 million in hospital charges could be saved if hospitalizations decrease 20 percent a year.
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