Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
S M P
TATE  EDICAID  ROGRAM 
 
 
E C C
FFORTS TO  ONTROL  OSTS 
 
 
D
FOR  ISPOSABLE 
 
I   S  
NCONTINENCE  UPPLIES 
Stuart Wright 
Deputy Inspector General for 
Evaluation and Inspections 
 
January 2014 
OEI-07-12-00710   
   
EXECUTIVE SUMMARY:  STATE MEDICAID PROGRAM EFFORTS TO 
CONTROL COSTS FOR DISPOSABLE INCONTINENCE SUPPLIES  
OEI-07-12-00710 
 
WHY WE DID THIS STUDY 
 
In 2012, fee-for-service State Medicaid programs reported spending $266 million on nine 
specific types of disposable incontinence supplies (e.g., diapers).  Many State legislatures 
have passed legislation directing States to seek opportunities to reduce the costs of health 
care goodssuch as incontinence suppliesand services. Since 2009, the Office of 
Inspector General has identified ensuring the integrity of Federal health care program  
payment methodologies as a top management challenge for the Department of Health and 
Human Services.  In addition, there have been a number of fraud cases involving 
disposable incontinence supplies. 
 
HOW WE DID THIS STUDY  
 
From each State Medicaid program (50 States and the District of Columbia), we collected 
2012 data on the claim volumes and fee-schedule reimbursement rates for nine 
Healthcare Common Procedure Coding System codes for commonly used disposable 
incontinence supplies. We conducted a survey of each State Medicaid program to 
determine how many States implemented or attempted to implement cost-control 
measures, such as competitive bidding, for such supplies.  We calculated the amount that 
Medicaid programs would save if the median competitive bidding rate were used.  For 
the five States that had implemented competitive bidding programs, we conducted 
structured telephone interviews with State Medicaid program staff to obtain further 
information about these programs.   
 
WHAT WE FOUND 
 
All State Medicaid programs implemented cost-control measuressuch as quantity 
limitations or reductions in fee-schedule amountsfor incontinence supplies.  Five State 
Medicaid programs implemented competitive bidding programs.  These programs 
reported savings of up to 50 percent. If State Medicaid programs had paid suppliers at 
the median competitive bidding rate, they could have paid 23 percent less, saving 
$62 million.  Other positive outcomes resulted from competitive bidding, such as 
increased beneficiary access to supplies, increased product quality, and State Medicaid 
program control of providing supplies.  However, States reported encountering initial 
challenges with their competitive bidding programs, and six States attempted to establish 
competitive bidding but did not fully implement it.  
 
WHAT WE RECOMMEND  
 
We recommend that the Centers for Medicare & Medicaid Services (CMS) encourage 
State Medicaid programs to seek further cost savings for disposable incontinence 
supplies. CMS concurred with our recommendation. 
   
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................4 

Findings........................................................................................................7 

All State Medicaid programs implemented cost-control measures 
for incontinence supplies .................................................................7 

State Medicaid programs could realize significant cost savings 
for incontinence supplies ...............................................................10 

State Medicaid programs reported both positive outcomes and 
initial challenges with respect to competitive bidding ...................11 
 
Conclusion and Recommendation .............................................................14 

Agency Comments and Office of Inspector General Response .................15 

Appendixes ................................................................................................16 

A: State Medicaid Program  Rates for HCPCS Codes T4521, 

T4522, T4523, T4524, and T4529 .................................................16 

B: State Medicaid Program  Rates for HCPCS Codes T4530, 

T4533, T4535, and T4543 ..............................................................18 

C: Agency Comments  ...................................................................20 

Acknowledgments......................................................................................21 

 
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)  
   
   
OBJECTIVES 
To determine: 
1. 	  the extent to which State Medicaid programs have implemented 
measures to control costs for incontinence supplies, 
2. 	  the potential savings in 2012 for State Medicaid programs if the 
median competitive bidding rate had been used, and  
3. 	  the outcomes of cost-control measures for incontinence supplies, as 
well as approaches implemented to reduce initial challenges.  
BACKGROUND 
In 2012, fee-for-service State Medicaid programs reported spending 
$266 million on nine specific types of disposable incontinence supplies 
(e.g., diapers). Many State legislatures have passed legislation directing 
States to seek opportunities to reduce the costs of health care goods and 
services through contracting processes such as competitive bidding.  To  
control costs, other States have reduced either the reimbursement rates or 
the maximum quantities of incontinence supplies allowed.  
Since 2009, the Office of Inspector General (OIG) has identified ensuring 
the integrity of Federal health care program payment methodologies as a 
top management challenge for the Department of Health and Human 
Services.1  In addition, there have been a number of fraud cases involving 
disposable incontinence supplies. In 2013, a Maryland supplier pleaded 
guilty to submitting and collecting claims for reimbursement for over 
$200,000 of incontinence supplies that were never delivered.2 In 2012, a 
supplier pleaded guilty to Federal charges stemming from the submission 
of nearly $45,000 in claims to the District of Columbia Medicaid program 
for diapers, disposable underpads, and gloves that were never actually 
provided.3    
 
1 OIG,  Top  Management and Performance Challenges. Accessed at 
http://oig.hhs.gov/reports-and-publications/top-challenges/2013/ on May 8,  2013. 
2  U.S. Attorneys Office, Maryland Business Owner Pleads Guilty to Health Care Fraud  
In Scheme Involving More Than  $200,000 in False Medicaid Claims, April 23, 2013.  
Accessed at http://www.justice.gov/usao/dc/news/2013/apr/13-141.html on July 3, 2013. 
3  U.S. Attorneys Office, Maryland Man Pleads Guilty to  Medicaid Fraud  Involving  
Power Wheelchairs and  Incontinence Supplies, October 11, 2012.  Accessed at 
http://www.fbi.gov/washingtondc/press-releases/2012/maryland-man-pleads-guilty-to-
medicaid-fraud-involving-power-wheelchairs-and-incontinence-supplies on  
November 1, 2012.  
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   1 
   
   
Medicaid Coverage of Disposable Incontinence Supplies 
A State Medicaid plan must include home health services for individuals 
who are entitled to nursing facility services.4  However, States may not 
make the need for institutional care a condition for receiving home health 
services.5  Federal regulation states that medical supplies, equipment, and 
appliances suitable for use in the home are required home health services.6   
Disposable incontinence supplies are considered medical supplies.  
Table 1 lists Healthcare Common Procedure Coding System (HCPCS) 
codes and corresponding descriptions of disposable incontinence supplies. 
Table 1: Disposable Incontinence Supplies  
HCPCS 
Description  
Code  
T4521   Adult-sized disposable incontinence product, brief/diaper, small 
T4522   Adult sized-disposable incontinence product, brief/diaper, medium  
T4523   Adult sized-disposable incontinence product, brief/diaper, large  
T4524   Adult sized disposable-incontinence product, brief/diaper, extra large 
T4529  Pediatric-sized disposable incontinence product, brief/diaper, small/medium 
T4530   Pediatric-sized disposable incontinence product, brief/diaper, large  
T4533   Youth-sized disposable incontinence product/brief/diaper  
T4535  Disposable liner/shield/guard/pad/undergarment, for incontinence 
T4543  Disposable incontinence product, brief/diaper, bariatric 
Source:  Carol  J. Buck,  2013 HCPCS Level II, 2013, pp. 339340. 
 
Although State standards for the coverage of disposable incontinence 
supplies may differ, States require that the beneficiarys physician 
prescribe supplies for a medical condition.  Physicians prescriptions 
indicate the quantity of supplies needed on a periodic basis, which is 
typically monthly.    
 
Medicaid Payments for Disposable Incontinence Supplies 
States have the option to provide Medicaid services to eligible  
beneficiaries on a fee-for-service basis or through managed-care 
arrangements.  In a fee-for-service model, beneficiaries can receive their 
supplies from any participating supplier who submits claims to the State 
for reimbursement.  Many fee-for-service State Medicaid programs set a 
maximum reimbursement rate for incontinence supplies using a fee 
 
4 Social Security Act (SSA)  1902(a)(10)(D), 42 U.S.C.    1396a(a)(10)(D).  

5 42 CFR   441.15(c). 

6 42 CFR   440.70(b)(3). 

State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   2 
   
   
schedule; a few programs reimburse suppliers based on a percentage of 
cost or customary charges.  In a managed-care model, State Medicaid 
programs pay managed-care plans a fixed rate per Medicaid beneficiary in 
exchange for services included in the plan and do not reimburse separately 
for incontinence supplies. 
Cost-Control Measures for Incontinence Supplies 
The SSA requires States to assure that payments are consistent with 
efficiency, economy, and quality of care.7  
Medicaid Cost-Control Measures. State Medicaid programs may use a 
variety of methods to control expenditures for incontinence supplies.  
First, States may impose limits on the quantity of supplies allowed per 
month. Secondly, State Medicaid programs may reduce fee-schedule rates 
to control expenditures for incontinence supplies.  This measure reduces 
the maximum reimbursement rate paid for supplies, but maintains 
beneficiaries access to any supplier willing to provide supplies at the 
stated rates. 
Lastly, State Medicaid programs may seek to lower costs for incontinence 
supplies by implementing a competitive bidding process.  In competitive 
bidding, State Medicaid programs solicit bids from vendors willing to 
provide supplies to Medicaid beneficiaries.  Vendors submit bids 
representing the lowest reimbursement that they will accept.  State 
Medicaid programs evaluate the bids and determine the winning suppliers.  
The winning suppliers bid prices become the States fee-schedule rates.  
Beneficiaries must receive their supplies from the winning suppliers.   
Federal regulations require State Medicaid programs to make assurances, 
in the form of a certification to the Centers for Medicare & Medicaid 
Services (CMS), that adequate supplies are available to beneficiaries under 
the competitive bidding process.8  State Medicaid programs may not 
implement competitive bidding until CMS makes a determination and 
issues a certification to the State.9    
 
7  SSA  1902(a)(30)(A), 42 U.S.C.   1396a(a)(30)(A). 
8  SSA  1915(a)(1)(B) and 42 CFR   431.54(d).  
9 42 CFR   431.51(d)(2). 
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   3 
   
   
Competitive Bidding in Medicare. The Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 required that Medicare 
replace the fee-schedule payment methodology for certain durable medical 
equipment, prosthetics, orthotics, and supplies (DMEPOS) with a 
competitive bid process.10, 11  In April 2012, CMS released the results from  
the first year of the competitive bidding program, showing that the 
program had reduced DMEPOS expenditures by 42 percent.  CMS found 
that real-time claims  monitoring and subsequent followup with 
beneficiaries indicated that access to necessary and appropriate items and 
supplies was maintained.12    
Related Reports 
In 2011, GAO released a report exploring the issues that CMS could face 
if it purchased DME directly from manufacturers.13   The report also 
described how the Department of Veterans Affairs and certain State 
Medicaid programs reduced their spending on a variety of types of DME 
through competitive bidding.  The report described the implications of 
using these purchasing models in Medicare. 
METHODOLOGY 
Scope 
This evaluation focuses on State Medicaid programs use of cost-control 
measures for incontinence supplies and the outcomes achieved from those 
measures.  We included data from  the 49 State Medicaid programs that 
paid claims for incontinence supplies on a fee-for-service basis.14  To  
calculate potential savings, we compared each States actual expenditures 
for 2012 to what would have been paid using the median rate of the States 
that implemented competitive bidding.  We did not determine the validity 
of the diagnoses that led to the prescription for incontinence supplies or  
the medical necessity of incontinence supplies for the beneficiary.  
 
10  Medicare Prescription Drug, Improvement, and  Modernization Act  of 2003, 
P.L. 108-173,  302(b), 117 Stat. 2066, 222429 (Dec. 8, 2003). 

11 We note that  Medicare does not consider  disposable incontinence supplies to  be 

durable medical equipment (DME); therefore, these supplies are not included in 

Medicares competitive bidding program. 
 
12 CMS, Competitive Bidding UpdateOne Year Implementation Update, p. 5, 

April 17, 2012.  Accessed at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/DMEPOSCompetitiveBid/Downloads/Competitive-Bidding-Update-One-Year-
Implementation.pdf  on April 27, 2012. 

13 GAO,  Medicare:  Issues for Manufacturer-Level Competitive Bidding for Durable 
Medical Equipment, GAO-11-337R, May 31, 2011. 

14 South Dakota and Tennessee reported that  they did not pay  fee-for-service claims  for 

incontinence supplies. 

State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   4 
   
   
Data Collection 
Request for Data. From each State Medicaid program, we collected 
summary information on the 2012 claim volumes (from State Medicaid 
management information systems) and fee-schedule reimbursement rates 
for nine HCPCS codes for commonly used disposable incontinence 
supplies. We received responses from all 51 State Medicaid programs; 
however, we excluded 2 State Medicaid programsTennessee and 
South Dakotafrom our analysis.  The Tennessee State Medicaid program 
responded that because 100 percent of its beneficiaries were enrolled in 
managed-care plans, it did not pay for incontinence supplies on a 
fee-for-service basis.  The South Dakota State Medicaid program  
responded that it did not pay for incontinence supplies on a fee-for-service 
basis in 2012. We note that South Dakota provides incontinence supplies 
through a waiver program, the Assistive Daily Living Services Program. 
Surveys.  We surveyed each of the State Medicaid programs (50 States and 
the District of Columbia) to determine how many States implemented or 
attempted to implement cost-control measures for incontinence supplies.  
We asked questions about the cost-control measures in effect during 2012. 
Telephone Interviews of States with Competitive Bidding Programs. For 
the five State Medicaid programs that implemented competitive bidding 
(Indiana, Maine, Michigan, New Hampshire, and Wisconsin), we 
conducted structured telephone interviews with State Medicaid program  
staff to gather more in-depth information about their experiences.  We  
asked questions about: 
	   practices that led to successful implementation and any barriers that 
needed to be overcome,  
	   the cost savings achieved and other positive outcomes that resulted, 
and 
	   initial challenges and approaches that State Medicaid programs used to 
reduce these challenges.  
Analysis  
Using each State Medicaid programs summary information on claim  
volumes for each HCPCS code, we calculated the amount that Medicaid 
programs would have saved if the median competitive bidding rate were 
used. For any State Medicaid program that did not report a specific 
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   5 
   
   
fee-schedule rate for a given type of supply, we imputed a rate by dividing 
total expenditures for the supply by the total quantity reimbursed.15    
We analyzed the survey responses to determine the extent to which State 
Medicaid programs implemented cost-control measures for incontinence 
supplies and the types of cost-control measures.  We analyzed the 
telephone interview responses to describe States competitive bidding 
programs, including initial challenges in implementation and outcomes. 
Limitations 
We conducted telephone interviews and requested documentation of 
savings from each of the five State Medicaid programs that implemented 
competitive bidding.  However, only Michigan, New Hampshire, and 
Wisconsin provided savings documentation.  Indiana officials reported 
that they could not separate savings for incontinence supplies from savings 
for other items in its competitive bidding program.  Maine officials 
reported that they did not track savings associated with the States 
competitive bidding program.  
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
 
15  We imputed rates for 35 State/HCPCS code combinations  out  of a total of  441 rate  
comparisons, or 8  percent.  All State Medicaid  programs that implemented competitive 
bidding reported specific fee-schedule  rates; therefore, we did not  need to impute rates 
for these States. 
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   6 
   
   
FINDINGS 
All State Medicaid programs implemented cost-control 
measures for incontinence supplies 
As of 2012, all State Medicaid programs had implemented one or more 
cost-control measures for incontinence suppliesall State Medicaid 
programs implemented quantity limitations, 21 States reduced their 
fee-schedule amounts, and five States implemented competitive bidding 
programs. 
All State Medicaid programs implemented quantity limitations 
Most often, States established maximum monthly quantity limits for each 
HCPCS code. For example, for each of the nine types of supplies 
reviewed, the Idaho Medicaid program set a limit of 240 units per month 
and the Alaska Medicaid program  set a limit of 500 units per month.  
Some States had differing limits for the same HCPCS code depending on 
the age of the beneficiary.  For example, in Maryland, the monthly limit 
for small adult diapers (T4521) was 240 units for beneficiaries aged 3 to 
15 and 180 units for beneficiaries aged 16 and older.    
Less commonly, States implemented quantity limitations by establishing 
maximum dollar amounts for supplies per month.  Two StatesArkansas 
and Kansasused this method.  The Arkansas Medicaid program set a 
monthly limit of $130 for incontinence supplies across all HCPCS codes.  
The Kansas Medicaid program set limits both on quantity and on dollar 
amount; it set a limit of six units per day, not to exceed $150 per month.  
Regardless of the type of quantity limitation, State Medicaid programs 
mayon the basis of an individual beneficiarys medical necessity 
appropriately authorize a quantity of incontinence supplies exceeding the 
established limit. 
Twenty-one State Medicaid programs reduced fee-schedule 
reimbursement amounts 
Twenty-one of forty-nine State Medicaid programs reported reducing 
fee-schedule reimbursement amounts for incontinence supplies between 
2000 and 2012. For example, in March 2011, the Connecticut Medicaid 
program reviewed fee-schedule rates of nearby States and reduced its rates 
to be consistent with those States.  The Louisiana Medicaid program  
reduced its fee-schedule reimbursement amounts twiceonce in January 
2010 and again in February 2012. Other State Medicaid programs reduced 
their fee-schedule amounts by a certain percentage across HCPCS codes.  
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   7 
   
   
The Nebraska Medicaid program reduced its fee-schedule amounts by 
2.5 percent in July 2011, and the Alabama Medicaid program reduced its 
fee-schedule amounts by 10 percent in June 2012. 
Five State Medicaid programs implemented competitive 
bidding programs 
As of 2012, five State Medicaid programs had implemented competitive 
bidding programs for incontinence supplies:  Indiana, Maine, Michigan, 
New Hampshire, and Wisconsin.  Officials from these States reported that 
the reasons for seeking competitive bidding programs included Statewide 
initiatives directing innovative purchasing methods, saving money on 
incontinence supplies, and building on successful competitive bidding for 
other types of DME (e.g., eyeglass frames and lenses) that resulted in cost 
savings for their Medicaid programs.   
States Reported a Variety of Program Features. State Medicaid programs 
obtained bids for incontinence supplies in two ways. Four programs 
Indiana, Maine, Michigan, and New Hampshiredeveloped Requests for 
Proposals to solicit bids from interested vendors.  In contrast, the 
Wisconsin State Medicaid program coordinated with the Michigan State 
Medicaid program to add the Wisconsin program to Michigans existing 
vendor contract. The Maine, Michigan, New Hampshire, and Wisconsin 
State Medicaid programs awarded contracts to one vendor per State. 
Indiana initially awarded contracts to three vendors, but subsequently 
ended its contract with one of the three. 
Beneficiaries obtained incontinence supplies through mail delivery or 
local suppliers. For three State Medicaid programs (Indiana, Michigan, 
and Wisconsin), beneficiaries ordered directly from vendors and received 
their supplies through mail delivery.  In Maine and New Hampshire, 
vendors shipped supplies directly to beneficiaries, or beneficiaries 
received them from local suppliers (i.e., stores located near beneficiaries 
homes).  In such cases, local suppliers purchased supplies from their 
States contracted vendor at guaranteed rates and then submitted claims to 
receive reimbursement from their States Medicaid program.  Table 2 
shows selected features of each States competitive bidding program.  
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   8 
   
   
Table 2: Selected Features of Competitive Bidding Programs  
Number  Contracting 
Year  Distribution 
of  Used for DME 
Contract   Mail  Through 
State  Vendor  Other Than 
First  Delivery  Local 
Awards   Incontinence 
Awarded  Suppliers  
in 2012  Supplies 
IN  2008   2  Yes   No  Yes  
ME  2003   1  Yes   Yes   Yes  
MI  1997   1  Yes   No  Yes  
NH  2009   1  Yes   Yes   Yes  
WI  2009   1  Yes   No  Yes  
Source:  OIG analysis of  structured  telephone interviews, 2013. 
 
States Reported Approaches That Assisted With Successful Implementation  
of Competitive Bidding. Officials from each of the five State Medicaid 
programs that implemented competitive bidding told us that engaging 
suppliers and stakeholder groups throughout the process was helpful to 
successful implementation.  Prior to making awards, State officials 
stressed the importance of providing suppliers with clear information 
about the competitive bidding process, such as the specific HCPCS codes 
included in the contract and how shipping costs would be handled.  State 
officials also found it helpful to continue engagement after bids were 
awarded. For example, the New Hampshire Medicaid program holds 
meetings with its supplier association at least annually.  New Hampshire 
also surveyed beneficiaries at the end of the first year of competitive 
bidding to gauge their satisfaction with the quality of supplies they 
received.  
States Reported Savings of Up to 50 Percent. Michigan reported that its 
contracted reimbursement rates represented discounts of approximately 
50 percent from its previous fee schedules, with an estimated 1-year 
savings of $16 million.  New Hampshires contracted reimbursement rates  
were 47 percent less than those prior to competitive bidding, with savings  
of over $1 million in the first 16 months of the program.  Wisconsin 
reduced monthly expenditures per beneficiary by an average of 15 percent 
from FY 2010 to FY 2012. 
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   9 
   
   
State Medicaid programs could realize significant cost 
savings for incontinence supplies 
Although all States implemented cost-control measures for incontinence 
supplies, additional cost savings may be possible.   
For eight of the nine supplies reviewed, median competitive 
bidding rates were lower than rates in States without 
competitive bidding programs  
Overall, there was less variability in rates among States that implemented 
competitive bidding than among States that had not.  For eight of the nine 
supplies we reviewed, Kentucky had the highest rates among States 
without competitive bidding programs.  Table 3 shows the range and 
median rates for the nine supplies reviewed for States that implemented 
competitive bidding and States that did not.  
Table 3: Range and Median of State Medicaid Program Payment Rates  
Rates in States 
Competitive Bidding 
Without Competitive 
HCPCS  Rates  
Description  Bidding  
Code  
Range  Median  Range  Median 
Adult-sized disposable incontinence 
T4521   $0.32$0.53  $0.40   $0.41*$1.69   $0.62  
product, brief/diaper, small 
Adult-sized disposable incontinence 
T4522   $0.32$0.53  $0.41   $0.46*$1.63   $0.66  
product, brief/diaper, medium  
Adult-sized disposable incontinence 
T4523   $0.39$0.65  $0.53   $0.50*$2.06   $0.80  
product, brief/diaper, large  
Adult-sized disposable incontinence 
T4524   $0.46$1.05  $0.65   $0.50*$2.68   $0.90  
product, brief/diaper, extra large  
Pediatric-sized disposable incontinence 
T4529   $0.24$0.52  $0.25   $0.25*$1.25   $0.49  
product, brief/diaper, small/medium 
Pediatric-sized disposable incontinence 
T4530   $0.36$0.53  $0.39   $0.36*$1.86   $0.55  
product, brief/diaper, large  
Youth-sized disposable incontinence 
T4533   $0.33$0.53  $0.39   $0.39*$1.84   $0.62  
product/brief/diaper  
Disposable liner/shield/guard/pad/ 
T4535   $0.18$0.50  $0.29   $0.15*$1.26   $0.43  
undergarment, for incontinence 
Disposable incontinence product, 
T4543   $0.70$1.89   $1.50  $0.41$4.32   $1.44  
brief/diaper, bariatric 
*  Indicates imputed rate. 

Source:  OIG analysis of State Medicaid program  survey responses, 2013. 
 
The State Medicaid programs 2012 rates for each of the nine types of 
supplies reviewed can be found in Appendix A  and Appendix B.   
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   10 
   
   
State Medicaid programs could have saved $62 million in 2012 
using the median competitive bidding rate 
State Medicaid programs paid $266 million for nine types of incontinence 
supplies in 2012. If State Medicaid programs had paid suppliers at the 
median rate among the five States that implemented competitive bidding, 
they could have paid 23 percent less, saving $62 million.  By HCPCS 
code, potential savings ranged from $2 million to $15 million.  For 
example, using the median competitive bidding rate for T4522 across 
States that paid more than this rate in 2012 would have yielded a savings 
of $12 million, or 27 percent.  By State, potential savings ranged from less 
than $1,000 (Hawaii) to $7.5 million (California).  Six States accounted 
for 50 percent of the potential savings (California, Illinois, New York, 
North Carolina, Pennsylvania, and Virginia). 
State Medicaid programs reported both positive 
outcomes and initial challenges with respect to 
competitive bidding 
Although the primary motivation to implement competitive bidding is to 
reduce expenditures, States reported a variety of other positive outcomes.  
At the same time, they experienced initial challenges when implementing 
their competitive bidding programs.  Finally, six State Medicaid programs 
attempted to establish competitive bidding for incontinence supplies, but 
did not ultimately implement this cost-control measure. 
State Medicaid programs reported increased beneficiary 
access, product quality, and program control 
State officials reported that their competitive bidding programs resulted  
not only in cost savings, but also in a variety of other positive outcomes.  
Officials from Maine and Michigan noted that having supplies delivered to 
beneficiaries residences increased access, particularly for beneficiaries 
with transportation challenges.  Wisconsin officials similarly noted that 
mail delivery increases the reliability of access to supplies.  In  
New Hampshire, competitive bidding increased the number and types of  
supplies available to beneficiaries.  
Secondly, officials from four States told us that having one supplier 
ensured consistency of product quality.  These officials explained that, 
prior to competitive bidding, suppliers provided products of varying 
quality (e.g., absorbency and performance).  In Wisconsin, there was an 
increase in the quality of supplies that the contracted vendor was able to 
offer in comparison to suppliers offerings prior to competitive bidding.  
Wisconsin officials stated that prior to competitive bidding, some local 
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   11 
   
   
suppliers would not accept the States fee-schedule rates for higher quality 
products. 
Lastly, State officials cited better overall control of providing incontinence 
supplies, such as reduced opportunity for beneficiaries to fraudulently use 
multiple suppliers to obtain an excess of supplies, fewer requests for prior 
authorizations, and centralized customer service for complaint resolution.  
Wisconsin officials noted that complaints are now resolved in a more 
streamlined manner than they were prior to competitive bidding. 
State Medicaid programs reported encountering initial 
challenges with their competitive bidding programs 
Officials from three State Medicaid programs reported complaints from  
beneficiaries about the specific brand or quality of supplies that they 
received following the implementation of competitive bidding.  All States  
included more than one brand of product for each supply type, so that 
beneficiaries could choose another brand if one did not meet their needs.  
In addition, for brands not offered with the contract, State Medicaid 
programs allowed prior authorization if a physician provided justification 
of the medical necessity for that brand. 
One State reported that having to transfer beneficiary information when 
the State switched from one vendor to another created a challenge to 
administering the States competitive bidding program. Michigan 
awarded a competitive bidding contract to a new vendor after the initial 
vendors contract expired.  State officials mentioned the need to ensure 
coordination of the transfer of beneficiary information when ending a 
contract with one vendor and awarding a new contract to a different 
vendor. 
Six State Medicaid programs attempted to establish 
competitive bidding programs but did not implement them  
Another six State Medicaid programs attempted to establish competitive 
bidding programs, but did not implement them because of factors such as  
supplier opposition.16   As a result, each of the six States implemented 
cost-control measures other than competitive bidding.  Three States 
reduced fee schedules, two States implemented quantity limitations, and 
one State implemented both.  Like the States that successfully  
implemented competitive bidding, three States reported that engaging 
suppliers and stakeholders was helpful to implement other measures that 
would meet the States cost-saving goals.  For example, the Texas 
 
16 The six State Medicaid programs were Florida, North Carolina, Ohio, South Carolina, 
Texas, and Washington.  
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   12 
   
   
Medicaid program held a meeting with suppliers to discuss the 
reimbursement rate for each HCPCS code on the basis of supplier cost.  As  
a result, the Texas Medicaid program reduced its fee schedules by an 
average of 8 percent.  
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   13 
   
   
CONCLUSION AND RECOMMENDATION 
All State Medicaid programs implemented cost-control measures such as 
quantity limitations or reductions of fee-schedule amounts for 
incontinence supplies. Five State Medicaid programs implemented 
competitive bidding programs, reporting savings of up to 50 percent.  
States reported other positive outcomes resulting from competitive 
bidding, such as increased beneficiary access to supplies, increased 
product quality, and State Medicaid program control of providing supplies.  
A few States experienced initial challenges when implementing 
competitive bidding and reported ways to reduce or alleviate these 
challenges.  
Cost savings will become increasingly important as the Medicaid 
population expands with the implementation of the Affordable Care Act.  
State Medicaid programs paid $266 million for nine types of incontinence 
supplies in 2012. If State Medicaid programs had paid suppliers at the 
median competitive bidding rate, they could have paid 23 percent less, 
saving $62 million.   
We recommend that CMS: 
Encourage State Medicaid programs to seek further cost 
savings for disposable incontinence supplies 
CMS could accomplish this by sharing information from State Medicaid 
programs that have reduced fee-schedule amounts or implemented 
competitive bidding programs with State Medicaid programs that have 
not. We recognize that not all State Medicaid programs have the level of 
incontinence-supply expenditures to warrant their own competitive 
bidding programs.  State Medicaid programs may be able to obtain lower 
rates for incontinence supplies by joining an existing contract of another 
State Medicaid program or meeting with suppliers to negotiate lower 
fee-schedule rates. 
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   14 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with OIGs recommendation and noted that it is available 
to provide technical assistance to States at their request.  CMS further 
stated that on August 2, 2013, it issued an Informational Bulletin to State 
Medicaid programs and other interested parties about Medicares  
Competitive Bidding Program.  
The full text of CMSs comments is provided in Appendix C. 
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   15 
   
   
APPENDIX A 
State Medicaid Program Rates for HCPCS Codes T4521, 
T4522, T4523, T4524, and T4529 
 
HCPCS Code  
State  
T4521  T4522   T4523   T4524   T4529  
Alabama  $0.80   $0.80   $0.80   $1.00   $0.40  
Alaska  $0.56   $0.76   $0.91   $1.06   $0.56  
Arkansas  $0.58   $0.70   $0.90   $0.93   $0.30/$0.38  
California  $0.44   $0.50   $0.66   $0.66   N/A 
Connecticut  $0.47   $0.52   $0.70   $0.73   $0.48  
Colorado  $0.62   $0.71   $0.85   $0.87   $0.43  
Delaware  $0.50   $0.50   $0.74   $0.88   $0.25  
District of Columbia  $0.90   $0.90   $0.90   $0.90   $0.90  
Florida  $0.63   $0.69   $0.80   $0.90   $0.53  
Georgia  N/A  N/A  N/A  N/A  $0.37  
Hawaii  $0.62   $0.66   $0.66   $0.69   N/A 
Idaho  $0.48   $0.60   $0.72   $0.77   $0.41  
Illinois  $0.49   $0.60   $0.67   $0.88   $0.54  
Indiana  $0.38/$0.40   $0.33/$0.38   $0.43/$0.47   $0.56/$0.57   $0.24/$0.25  
Iowa  $0.77   $0.78   $1.00   $1.11   $0.77  
Kansas  $0.70   $0.80   $0.90   $0.90   $0.45  
Louisiana  $0.50   $0.60   $0.87   $0.87   $0.50  
Maine  $0.36   $0.413   $0.534   $0.647   $0.245  
Maryland  $0.66   $0.66   $0.93   $1.04   $0.60  
Massachusetts  $0.46   $0.53   $0.71   $0.74   $0.79  
Michigan  $0.53   $0.53   $0.65   $1.05   $0.52  
Minnesota  $0.63/$0.80   $0.72/$0.94   $0.80/$1.13   $0.92/$1.38   $0.44  
Mississippi  $0.55   $0.65   $0.95   $0.95   $0.55  
Missouri  $0.50   $0.50   $0.50   $0.50   $0.50  
Nebraska  $0.81   $0.88   $0.98   $0.98   $0.75  
Nevada  $0.56   $0.60   $0.80   $0.96   $0.43  
New Hampshire   $0.32/$0.43   $0.32/$0.47   $0.39/$0.57   $0.46/$0.65   N/A 
New Jersey   $0.63   $0.63   $0.63   $0.81   $0.45  
New Mexico  $0.65   $0.53   $0.98   $0.98   $0.65  
New York   $0.47   $0.51   $0.68   $0.72   $0.30  
North Carolina   $0.74   $0.78   $0.86   $0.86   $0.49  
Ohio  $0.55   $0.63   $0.71   $0.79   $0.40  
Oklahoma  $0.78   $0.85   $0.96   $1.13   N/A 
continued on next page 
Note: N/A indicates that no  fee-schedule rate was reported for the item.  Seven StatesArizona, Kentucky, Montana, 
North Dakota, South Dakota, Tennessee, and West Virginiaare not included in the table because these States  did not 
report specific  fee-schedule rates for any of the nine  types of supplies. 
*  Some States  reported more than one fee-schedule rate for  a given item.  For these instances, we show the different rates 
with a slash (/) in between. 
 
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   16 
   
   
State Medicaid Program Rates for HCPCS Codes T4521, 
T4522, T4523, T4524, and T4529 (Continued) 
 
HCPCS Code  
State  
T4521  T4522  T4523  T4524   T4529  
Oregon   $0.48  $0.64  $0.71  $0.76   $0.48  
Pennsylvania  $0.63  $0.65  $0.72  $0.72   $0.55  
Rhode Island   $0.95  $0.95  $0.95  $0.95   $0.95  
South Carolina   $0.47  $0.46  $0.56  $0.73   $0.45  
Texas   $0.53  $0.56  $0.60  $0.75   $0.38  
Utah   $0.62  $0.71  $0.83  $0.96   $0.36  
Vermont   $0.67  $0.67  $0.67  $1.07   $0.49  
Virginia  $0.41/$0.51  $0.50/$0.65  $0.88/$0.94   $1.13   $0.51  
Washington  $0.44  $0.54  $0.65  $0.78   $0.41  
Wisconsin  $0.43  $0.44  $0.58  $0.65   $0.40  
Wyoming   $0.59  $0.68  $0.80  $0.92   $0.60  
Source:  OIG analysis of Medicaid program survey responses, 2013.  
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   17 
   
   
APPENDIX B 
State Medicaid Program Rates for HCPCS Codes T4530, 
T4533, T4535, and T4543 
 
HCPCS Code  
State  
T4530  T4533   T4535   T4543  
Alabama  $0.50   N/A  N/A  $2.00  
Alaska  $0.59   $0.60   $0.43   $4.32  
Arkansas  $0.58   $0.60   $0.43/$0.69   $1.07  
California  N/A  $0.42   $0.24/$0.36/$0.43/$0.48   N/A 
Connecticut  $0.60   $0.43   $0.34   $1.30  
Colorado  $0.43   $0.55   $0.41   $0.41  
Delaware  $0.37   $0.47   $0.33   N/A 
District of Columbia  $0.90   N/A  $0.50   $0.90  
Florida  $0.58   $0.65   $0.44   $1.52  
Georgia  $0.37   $0.64   N/A  N/A 
 
Hawaii  N/A  N/A  N/A  N/A 
Idaho  $0.47   $0.48   $0.34   $0.76  
Illinois  $0.67   $0.49   $0.43   $1.50  
Indiana  $0.36/$0.37   $0.35/$0.37   $0.20/$0.22   $1.50/$1.75  
Iowa  $0.87   $0.87   $0.40   N/A 
Kansas  $0.48   $0.72   $0.15   N/A 
Louisiana  $0.50   $0.55   N/A  $1.46  
Maine  $0.385   $0.389   $0.497   $0.70  
Maryland  $0.60   $0.64   $0.39   N/A 
Massachusetts  $0.83   $0.46   $0.46   N/A 
Michigan  $0.53   $0.53   $0.34   $1.72  
Minnesota  $0.50   $0.69/$1.09   $0.41/$0.69   $2.34  
Mississippi  $0.55   $0.60   N/A  N/A 
Missouri  $0.50   $0.50   N/A  $0.50  
Nebraska  $0.81   $0.81   $0.44   $1.01  
Nevada  $0.47   $0.56   $0.37   $1.95  
New Hampshire   N/A  $0.33/$0.44   $0.18/$0.32   $0.71/$0.94  
New Jersey   $0.45   $0.63   N/A  N/A 
New Mexico  $0.45   $0.98   N/A  N/A 
New York   $0.36   $0.39   $0.28   $1.38  
North Carolina   $0.55   $0.67   $0.34   $1.29  
Ohio  $0.40   $0.46   $0.40   $2.12  
Oklahoma  N/A  N/A  $0.59   N/A 
continued on next page 
Note: N/A indicates that no  fee-schedule rate was reported for the item.  Seven StatesArizona, Kentucky, 
Montana, North Dakota, South Dakota, Tennessee, and  West Virginiaare  not included in the table because these  
States did not report specific fee-schedule rates for  any  of the nine types of supplies. 
*  Some States  reported more than one fee-schedule rate for a given item.  For these instances, we show the 
different rates with a slash (/) in between. 
 
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   18 
   
   
State Medicaid Program Rates for HCPCS Codes T4530, 
T4533, T4535, and T4543 (Continued) 
 
HCPCS Code  
State  
T4530  T4533   T4535   T4543  
Oregon  $0.48   $0.48   $0.64   N/A 
Pennsylvania  $0.55   $0.65   $0.76   $1.62  
Rhode Island   $0.95   $0.95   $0.77   $2.85  
South Carolina   $0.45   $0.47   $0.21   $1.27  
Texas  $0.48   $0.53   $0.27   $0.94  
Utah  $0.52   $0.71   $0.44   $2.50  
Vermont  $0.43   $0.67   $0.43   $1.44  
Virginia  $0.59   N/A  $0.34   N/A 
Washington  $0.43   $0.44   $0.32   $2.21  
Wisconsin  $0.44   $0.46   $0.29   $1.89  
Wyoming  $0.85   $1.07   $0.75   N/A 
Source:  OIG analysis of Medicaid program survey responses, 2013.  
 
   
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   19 
  APPENDIXC 
Agency Comments 
DEPARTMENT OF HEALTH & HUM;\N SERVICES  Centers lor Medicare & Medicaid Services 
---
------------------------ 
Administrator 
Washongton. DC 20201 
DATE: 
NOV  19  2013 
TO: 	 David R. Levinson 
Inspector General 
FROM: 	 Marilyn Tavenner 
Administrator 
SUBJECT: 	 Office of Inspector General (OIU) Draft Report:  "State Medicaid Program 
Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-0071 0) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the above-referenced draft report. The purpose of this report was to survey states to 
determine how many states implemented or attempted to implement cost-control measures, such 
as competitive bidding. for incontinence supplies. 
The O!U found that all state Medicaid programs implemented cost-control measures such as 
quantity limitations or fee-schedule reductions for incontinence supplies.  Additionally, the 
report tinds that five state Medicaid programs implemented competitive bidding programs with 
the result ofachieving significant savings. 
OIG Recommendation 
The O!G recommends that CMS encourage state Medicaid programs to seck further cost savings 
for disposable incontinence supplies. 
CMS Response 
We concur with OIG's recommendation and note that we are available to provide technical 
assistance to states, at their request.  Additionally. on August 2, 2013. CMS issued an 
Infom1ational Bulletin entitled Medicare Competitive Bidding Program for Durable !vfedical 
Equipment and Coordination ofBenejitsfor Beneficiaries Eligible for Afedicare and A,fedicaid (Dual 
Eligibles). which provided information to state Medicaid agencies and other interested parties about 
Medicare's Competitive Bidding Program. 
The CMS thanks O!G for their continued support in reviewing states' efforts to control costs for 
disposable incontinence supplies, 
State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)  20   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Brian T.  Whitley, Regional 

Inspector General in the Kansas City regional office.  

Tricia Fields served as the team leader for this study.  Other Office of 

Evaluation and Inspections staff from the Kansas City regional office who 

conducted the study include Jordan Clementi and Brian T. Pattison.  

Central office staff who provided support include Clarence Arnold, 

Kevin Manley, and Christine Moritz.  

State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710)   21 
   
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as  
amended, is  to protect the integrity of the Department of  Health and Human Services  
(HHS)  programs, as well as the health and welfare of beneficiaries  served by those 
programs.  This statutory mission  is  carried  out through  a nationwide network  of  audits, 
investigations, and inspections conducted by the  following operating components: 
Office of Audit Services 
The Office  of  Audit Services  (OAS) provides auditing services  for HHS, either by  conducting  
audits  with its own audit resources or by  overseeing  audit work done by others.  Audits  
examine the performance of HHS programs and/or its grantees and contractors in carrying  
out their respective responsibilities and are intended  to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections 
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
Office of Counsel to the Inspector General  
The Office of Counsel to the  Inspector  General (OCIG) provides general legal services to 
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
legal support for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and abuse cases involving HHS programs,  including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.