Takeaway: The disposable nature of G7 means it will no longer be treated as DME; changes in law may be required for Medicare coverage/reimbursement

DXCM | Neither Fish Nor Fowl; The Reimbursement Headwinds for G7 - 2019.06.30 Primary Causes of End Stage Renal Disease

In response to Field Notes we published on Friday, we received a number of questions about the reimbursement environment and resulting TAM for DXCM's Continuous Glucose Monitors. We thought it would be helpful to provide a short explanation of the Medicare reimbursement construct and history.

CGM is covered as durable medical equipment under Medicare law/regulation. Durable Medical Equipment has five criteria for Medicare coverage:

  • Can withstand repeated use; 
  • Has an expected life of at least 3 years; 
  • Is primarily and customarily used to serve a medical purpose;
  • Generally is not useful to a person in the absence of an illness or injury; and 
  • Is appropriate for use in the home

Blood glucose monitors for Type I have been covered since the 1980s. In 1998, Congress added Type II . The law includes this phease that governs all coverage decisions:

 and includes blood-testing strips and blood glucose monitors for individuals with diabetes without regard to whether the individual has Type I or Type II diabetes or to the individual's use of insulin (as determined under standards established by the Secretary in consultation with the appropriate organizations)

In other words, the Medicare Type II coverage was not a medical/scientific decision but a political one. Knowing this, Congress deferred to the HHS Secretary the terms under which glucose monitors would be covered by Medicare.

Until DXCM’s received an expanded indication in Dec 2016, Medicare did not reimburse for CGMs because they were limited to monitoring adjunct to and not as a replacement of traditional blood glucose monitoring. With the DXCM's 2016 approval, CMS changed their policy to accommodate the FDA’s indication. In doing so they sought to limit reimbursement to medically necessary situations - using the discretion afforded them by statute - while complying with Congress’ directive. CMS came up with these criteria:

  • The beneficiary has diabetes mellitus (Refer to the "ICD-10 Codes that are Covered" section of the LCDrelated Policy Article for applicable diagnoses); and,
  • The beneficiary has been using a BGM and performing frequent (four or more times a day) testing; and,
  • The beneficiary is insulin-treated with multiple (three or more) daily injections of insulin or a Medicare-covered continuous subcutaneous insulin infusion (CSII) pump; and,
  • The beneficiary’s insulin treatment regimen requires frequent adjustment by the beneficiary on the basis of BGM or CGM testing results; and,
  • Within six (6) months prior to ordering the CGM, the treating practitioner has an in-person visit with the beneficiary to evaluate their diabetes control and determined that criteria (1-4) above are met; and,
  •  Every six (6) months following the initial prescription of the CGM, the treating practitioner has an in-person visit with the beneficiary to assess adherence to their CGM regimen and diabetes treatment plan.

Because CMS is trying to comply with the law while limiting reimbursement to T2 where there is a clear medical need to monitor glucose, this is one of those rare cases where commercial insurers, not subject to Congressional directives, are and probably will continue to resist wide open access by T2 populations. Those commercial payers that do permit reimbursement for T2 patients, follow Medicare policy, more or less. 

The current Medicare reimbursement policy could change if the FDA, as they did with DXCM G5, expands the indication to include monitoring of T2 patients who are non-insulin intensive. CMS would then follow suit as they did in 2017 with a new reimbursement policy and guidance. An expansion of the indication to include all T2 patients and not just those on an insulin intensive therapy, as described by Medicare policy, would require some evidence. Current research is mixed on monitoring of non-insulin dependent T2 diabetics. We have so far been unable to locate studies on monitoring of non-intensive but insulin dependent T2 diabetics.

The introduction of G7 complicates things further. Because G7 will be disposable and therefore not DME the reimbursement gets really fuzzy. If it is not DME, it is not subject to the rules listed above. But if not DME, what is it? From a speech by CMS Administrator Seema Verma in May:

We are also working with Congress on a raft of legislative changes to address the challenges we face in adapting the Medicare program to modern technology. For example, the President’s Budget proposes expanding coverage of disposable devices, such as innovative glucose monitors and insulin pumps that substitute for a durable device, for use in the management and treatment of diabetes.

 The budget proposal to which she refers is a legislative proposal described thusly:

Medicare DME coverage excludes non-durable alternatives to DME. This proposal allows Medicare coverage for innovative non-durable medical equipment alternatives to treat and manage diabetes. Payment for these alternative items would be subject to competitive bidding and capped at the payment rate for their DME counterpart. Allowing access to these alternatives makes it possible for beneficiaries to choose items and services that better suit their medical needs. [No budget impact]

The direction the administration is heading in is to re-define DME at least as far as it applies to glucose monitors to include disposables like the G7. This policy dovetails with new initiatives to address kidney disease articulated in March by Secretary Azar. Diabetes is, of course, a common cause of kidney disease.

As suggested by the president's budget, access to Medicare reimbursement for G7, as re-defined DME or otherwise, requires legislation. We would not rule out a demonstration as a possible alternative if the path to Capitol Hill appears blocked beyond 2020. If legislation is required, the possibility of expanding the addressable market beyond T1 and T2 insulin intensive exists as Congress could always specify that CGM be available to anyone with T1 or T2, regardless of insulin use, including no use. However, such a move would shift the proposal from zero budget impact to some value that reflects the larger TAM, complicating things further, and requiring a budgetary offset.

Legislation is a long shot right now. The FY2020 budget could be a vehicle but Congress is expected to pass a Continuing Resolution to fund the government until after Nov 2020. That means a lame duck budget which makes for some good possibilities. However, if the White House does not turn or the House flips again, things could get very wild up there and predictions will be hard to make.

Another possible vehicle is pending drug legislation. Text is expected to be released after the July 4 holiday. We have seen no indication thus far that Senate HELP or Senate Finance are considering the idea.

A third possibility is Medicare Extender legislation. Right now we expect that to be included in the Senate drug bill. If it gets dropped, a bill later in the year could be a possibility.

Bottom line: Medicare reimbursement for CGM is and will be T1 and insulin intensive T2 for the foreseeable future with none available for a disposable device until Congress acts. Given the mixed evidence on monitoring of non-insulin dependent T2, Medicare and commercial reimbursement are likely to maintain the status quo, regardless of a redefinition of DME, unless and until evidence emerges that satisfies the regulators.

Call with questions.

Emily Evans
Managing Director – Health Policy


Thomas Tobin
Managing Director