Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

STATE MEDICAID PROGRAM 

EFFORTS TO CONTROL COSTS 

FOR DISPOSABLE 

INCONTINENCE SUPPLIES 

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 goods—such as incontinence supplies—and 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 measures—such as quantity 

limitations or reductions in fee-schedule amounts—for 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. Attorney’s 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. Attorney’s 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-tomedicaid-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 

Code Description 

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. 339–340. 

Although State standards for the coverage of disposable incontinence 

supplies may differ, States require that the beneficiary’s 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 State’s 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 State’s 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, 2224–29 (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 

Medicare’s competitive bidding program.
 12 CMS, Competitive Bidding Update—One Year Implementation Update, p. 5, 

April 17, 2012. Accessed at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/DMEPOSCompetitiveBid/Downloads/Competitive-Bidding-Update-One-YearImplementation.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 programs—Tennessee and 

South Dakota—from 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 program’s 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 State’s 

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 supplies—all 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 States—Arkansas 

and Kansas—used 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 

may—on the basis of an individual beneficiary’s 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 twice—once 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 Hampshire—developed 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 Michigan’s 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 

State’s contracted vendor at guaranteed rates and then submitted claims to 

receive reimbursement from their State’s Medicaid program. Table 2 

shows selected features of each State’s 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 

State 

Year 

Contract 

First 

Awarded 

Number 

of 

Vendor 

Awards 

in 2012 

Mail 

Delivery 

Distribution 

Through 

Local 

Suppliers 

Contracting 

Used for DME 

Other Than 

Incontinence 

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 Hampshire’s 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 

HCPCS 

Code Description 

Competitive Bidding 

Rates 

Rates in States 

Without Competitive 

Bidding 

Range Median Range Median 

T4521 Adult-sized disposable incontinence 

product, brief/diaper, small $0.32–$0.53 $0.40 $0.41–*$1.69 $0.62 

T4522 Adult-sized disposable incontinence 

product, brief/diaper, medium $0.32–$0.53 $0.41 $0.46–*$1.63 $0.66 

T4523 Adult-sized disposable incontinence 

product, brief/diaper, large $0.39–$0.65 $0.53 $0.50–*$2.06 $0.80 

T4524 Adult-sized disposable incontinence 

product, brief/diaper, extra large $0.46–$1.05 $0.65 $0.50–*$2.68 $0.90 

T4529 Pediatric-sized disposable incontinence 

product, brief/diaper, small/medium $0.24–$0.52 $0.25 $0.25–*$1.25 $0.49 

T4530 Pediatric-sized disposable incontinence 

product, brief/diaper, large $0.36–$0.53 $0.39 $0.36–*$1.86 $0.55 

T4533 Youth-sized disposable incontinence 

product/brief/diaper $0.33–$0.53 $0.39 $0.39–*$1.84 $0.62 

T4535 Disposable liner/shield/guard/pad/ 

undergarment, for incontinence $0.18–$0.50 $0.29 $0.15–*$1.26 $0.43 

T4543 Disposable incontinence product, 

brief/diaper, bariatric $0.70–$1.89 $1.50 $0.41–$4.32 $1.44 

* 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 
 

 

State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies (OEI-07-12-00710) 12 

suppliers would not accept the State’s 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 State’s competitive bidding program. Michigan 

awarded a competitive bidding contract to a new vendor after the initial 

vendor’s 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. 
 

 

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 OIG’s 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 Medicare’s 

Competitive Bidding Program. 

The full text of CMS’s 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 

State 

HCPCS Code 

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 States—Arizona, Kentucky, Montana, 

North Dakota, South Dakota, Tennessee, and West Virginia—are 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) 

State 

HCPCS Code 

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 

State 

HCPCS Code 

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 States—Arizona, Kentucky, 

Montana, North Dakota, South Dakota, Tennessee, and West Virginia—are 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) 

State 

HCPCS Code 

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 1 9 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 of achieving 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 OIG’s 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.