BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 1104
S
AUTHOR: Cedillo
B
AMENDED: As Introduced
HEARING DATE: April 21, 2010
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CONSULTANT:
1
Chan-Sawin/
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SUBJECT
Health care coverage: diabetes-related complications
SUMMARY
Requires health care service plans (health plans) and
health insurers to provide coverage for the diagnosis and
treatment of diabetes-related complications.
CHANGES TO EXISTING LAW
Existing law:
Existing law provides for the regulation of health care
service plans (health plans) by the Department of Managed
Health Care (DMHC) and for the regulation of health
insurers by the Department of Insurance (CDI). Health
plans and insurers are required by law to cover various
health care services, including basic health care services,
such as physician services, hospital inpatient and
ambulatory care services, diagnostic laboratory services,
preventive health services, emergency health care services,
and hospice care.
Existing law requires health plans and health insurers to
provide coverage for certain equipment, supplies and
medications for the treatment of diabetes, particularly for
the management of insulin and include many items available
over the counter. The list of covered equipment, supplies
and medications includes podiatric devices to prevent or
Continued---
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 2
treat diabetes-related complications and visual aids,
excluding eyewear, to assist the visually impaired with
proper dosing of insulin.
Coverage for diabetes outpatient self-management training,
education, and medical nutrition therapy necessary to
enable an enrollee or insured to properly use the
equipment, supplies and medications related to their
diabetes is also required by current law. Existing law
also requires health plans and health insurers to provide
coverage for special footwear for those suffering from foot
disfigurement, including from diabetes.
Existing law authorizes DMHC to regulate the provision of
medically necessary prescription drug benefits by a health
plan to the extent that the plan provides coverage for
those benefits. Existing regulation requires health plans
providing outpatient prescription drugs to provide all
medically necessary prescription drugs, except as specified
in that regulation.
This bill:
Beginning January 1, 2011, this bill requires health plan
contracts and health insurance policies that cover
hospital, medical, or surgical expenses, to provide
coverage for the diagnosis and treatment of
diabetes-related complications, with the exception of
specialized health plan contracts. If the contract or
policy covers prescription benefits, this bill would
require that contract or policy to also provide coverage
for prescription medications for the treatment of
diabetes-related complications. This bill also prevents
copayments and deductibles, as it applies to coverage for
diabetes-related conditions, from exceeding those
established for similar benefits.
This bill specifically provides that diabetic peripheral
neuropathy is a diabetes-related complication. This bill
also makes other clarifying and technical changes.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
BACKGROUND AND DISCUSSION
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 3
According to the author, while current law requires
treatment for diabetes, including glucose monitors,
insulin, testing strips and prescriptions as covered items,
it is unclear whether coverage for treating complications
from diabetes is a state mandate. There is a need to
ensure that diabetes-related complications are covered to
the same standards as insulin and glucose management.
This bill would make clear to patients and physicians that
health plans and health insurers must cover treatment due
to complications from diabetes, in addition to diabetes
itself. The author states that the bill does not specify
how health plans and health insurers are to cover these
complications.
Diabetes
Diabetes is a condition where the body is not able to
regulate levels of sugar in the blood. In the United
States, it is estimated that 23.6 million people, or eight
percent of the total population, are affected by diabetes,
with over 200,000 deaths annually. In California, 2.2
million, or 8.3 percent, of Californians are diabetic.
Complications from diabetes
Diabetes can result in short and long-term complications,
many of which, if not prevented and left untreated, can be
fatal. Diabetes-related complications may lead to kidney
failure, blindness, and/or amputation, and commonly
include, but are not limited to:
Cardiovascular disease (heart disease), which may
cause fatal complications, such as coronary heart
disease (leading to a heart attack), and stroke (a
common cause of disability and death in people with
diabetes). People with diabetes are two to four times
more likely to develop cardiovascular disease than
people without diabetes.
Peripheral vascular disease (arterial disease),
results in arteries become occluded. About 75 percent
of diabetic adults also report high blood pressure or
use of hypertension medications.
Diabetic nephropathy (kidney disease), may result
in total kidney failure and in the need for dialysis
or kidney transplant. Diabetes is the leading cause of
kidney failure in the developed world and accounts for
approximately 35 percent to 40 percent of new cases of
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 4
End Stage Renal Disease (ESRD) each year. Almost
200,000 people with ESRD related to diabetes were
living on chronic dialysis or with a kidney transplant
in 2005.
Diabetic retinopathy (eye disease), damage to the
retina which can lead to vision loss. Diabetes is the
leading cause of blindness among adults aged 20-74.
Diabetic neuropathy (nerve disease), which
primarily affect the legs and feet. Foot ulcers are
common symptoms. Infections may result in amputation.
Diabetic foot ulcers which can be non-healing and,
in conjunction with diabetic neuropathy, lead to
amputations.
Diabetic peripheral neuropathy
Neuropathy is a disorder of the nerves-the motor, sensory
and autonomic nerves that connect the spinal cord to
muscles, skin and internal organs. Diabetes is the most
common cause of neuropathy in the western world, and may
occur in both type I and type II diabetes.
The results of such damage include impaired sensation or
pain in the feet or hands, slowed digestion of food in the
stomach, carpal tunnel syndrome, erectile dysfunction, or
other nerve problems. According to the Centers for Disease
Control and Prevention (CDC), about 60 percent to 70
percent of people with diabetes have mild to severe forms
of nervous system damage.
Although there are four main types of diabetic neuropathy,
the most common is diabetic peripheral neuropathy (DPN)
which usually affects the hands and feet, causing weakness,
numbness, tingling and pain. Almost 30 percent of people
with diabetes aged 40 years or older have impaired
sensation in the feet (i.e., at least one area lacks
feeling).
Severe forms of diabetic nerve disease are a major
contributing cause of lower-extremity amputations. In
fact, more than 60 percent of non-traumatic lower-limb
amputations occur in people with diabetes, and in 2004,
about 71,000 non-traumatic lower-limb amputations were
performed in diabetics.
California Health Benefits Review Program (CHBRP)
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Pursuant to AB 1996 (Thomson), Chapter 795, Statutes of
2002, and SB 1704 (Kuehl), Chapter 684, Statutes of 2006,
the University of California is requested to assess
legislation proposing a mandated benefit or service, or the
repeal of a mandated benefit or service, through the
California Health Benefits Review Program (CHBRP). CHBRP
prepares a written analysis of the public health, medical,
and economic impacts of such measures. The following are
highlights from the CHBRP analysis:
Coverage variations
DMHC-regulated health plans and CDI-regulated health
insurance policies currently provide coverage for supplies
and devices for the treatment of diabetes, and for
podiatric devices (such as shoes for diabetics) to prevent
or treat diabetes-related complications. Therefore, the
bill would not alter coverage for orthotics (podiatric
devices).
Many states have mandate laws covering diabetes-related
supplies and education, but no state mandates broad
coverage for diagnosis and treatment of diabetes-related
conditions.
Assumptions of the analysis
SB 1104 does not define what diabetes-related complications
are, nor does it specify the scope of the coverage. CHBRP
assumed that the bill would require coverage of all
services, devices, and medications medically necessary for
the diagnosis and treatment of all diabetes-related
complications.
The report focused on common treatments and services
related to the diagnosis and treatment of select
diabetes-related complications. However, the mandate is
broad and would require coverage of more treatments and
services for more diabetes-related conditions than are
described in this report. CHBRP has assumed that the
mandate will require coverage for outpatient medications.
The list of all services or treatments for the diagnosis or
treatment of diabetes-related complications is extensive
and ever growing. Due to the nature of physicians' coding,
whereby physicians may code a diabetic patient who is being
treated for a complication as either
"diabetes-with-complications" or "diabetes," the analysis
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 6
considered all diabetic enrollees, so as not to
inadvertently overlook any diagnoses or treatments of
diabetes-related complications. Thus, the report makes the
simplifying assumption of examining all durable medical
equipment (DME), medical supplies, prosthetics, and
outpatient prescription medications for enrollees with
diabetes.
Federal health care reform
This March, the federal government enacted the federal
health reform, which includes many provisions that go into
effect by 2014, and beyond, which could make drastic
changes to the California health insurance market and its
regulatory environment. For example, the law would
establish a state-based health insurance exchange, with
minimum benefit standards, for the small group and
individual market.
In addition, federal health reform includes prescriptions
as a general category that is included in the "essential
health benefits package." It is not clear what type of
prescriptions will be covered as an essential benefit. How
these provisions are implemented in California would depend
on regulations from federal agencies, and statutory and
regulatory actions taken by the state.
Federal health reform also includes provisions that are
enacted by September 2010, which would expand the number of
Californians with insurance, such as requiring coverage for
dependents up to age 26. This would decrease the number of
uninsured and increase the number of people impacted by
this mandate. The CHBRP analysis does not reflect the
impact from implementation of federal health reform
requirements.
Population affected by the mandate
Approximately 19.5 million (51 percent) Californians have
health coverage that may be
subject to a health benefit mandate law. The rest of the
population are either uninsured, or have insurance that is
not subject to health insurance benefit mandate laws.
Of the 19.5 million, 1.1 million (5.6 percent) Californians
are diagnosed with diabetes. All of these enrollees have
coverage for hospital and physician/provider services, and
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 7
for orthotics. However, CHBRP estimated that out of the
1.1 million:
Eight percent (88,000) of these insured diabetics
have no coverage for certain medical treatments
related to their diabetes-related complication (such
as wound dressings, certain DME, and/or prosthetics).
By market segment, DMHC-regulated individual and small
group plans would be most impacted.
Five percent (58,000) of these insured diabetics do
not have coverage for outpatient prescription
medications . By market segment, privately funded
DMHC-regulated large group plans have the largest
numbers of enrollees without outpatient pharmacy
benefits for oral chemotherapy medications, while
CDI-regulated individual policies had the highest
percentage of enrollees (11.9 percent) of enrollees
without outpatient pharmacy benefits for oral
chemotherapy medications.
Medical effectiveness
The CHBRP analysis included a review of medical
effectiveness literature, which focused on treatments most
commonly used in the United States for diabetic
nephropathy, diabetic neuropathy, diabetic retinopathy and
diabetic foot ulcers (diabetes is a major risk factor for
contracting these conditions). The review found evidence
of medical effectiveness for many medical services,
equipment, and medication , including:
Outpatient prescription medications for treating
diabetic neuropathy, diabetic nephropathy, and
diabetic foot ulcers;
Hospital and physician/provider services (including
medications delivered in an inpatient setting), such
as use of corticosteroids, intravitreal injections,
hyperbaric oxygen therapy, etc.; and,
Certain medical supplies, which increased the
likelihood that diabetic foot ulcers will heal.
The medical effectiveness review did not identify
literature regarding the effectiveness of: 1) durable
medical equipment (DME) for use by persons with diabetic
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foot ulcers or amputations, or comparing the use of
prosthetics for individuals with prosthetics vs. diabetics
with diabetes-related amputations who did not use
prosthesis. However, it noted that the lack of evidence
was not evidence of a lack of effect or benefit. Canes,
crutches, walkers, and wheelchairs improve the mobility of
persons with foot ulcers or amputations. These devices
may, in turn, improve their ability to perform instrumental
activities of daily living (e.g., grocery shopping,
preparing meals) and quality of life. Prosthetic feet and
legs may improve the mobility of persons with diabetes who
have had amputations, which is likely to improve their
ability to perform instrumental activities of daily living
and their quality of life.
Cost and coverage impact
According to CHBRP, the total cost to mandate coverage for
diagnosis and treatment of diabetes-related complications
is $49,552,000 , mainly due to administrative costs
associated with providing coverage of required services for
persons who do not currently have coverage.
The mandate would result in a cost shift of approximately
$120 million per year from diabetic enrollees to health
plans and health insurers but, as patient access treatment
and services related to their diabetes-related
complications, this is offset by an increase in enrollee
out-of-pocket cost-sharing for covered benefits of
approximately $21 million per year . The decrease in
out-of-pocket expenses for non-covered benefits would vary
between enrollees, depending on the supplies or treatments
used. For example, a prosthetic device could cost up to
$2,500 for the device alone (e.g., not including fittings,
physician visits, etc.), and a wheelchair could be as
expensive as $20,000 or $35,000.
The mandate is estimated to increase premiums in aggregate
by about $148,640,000. On an individual basis, enrollee
premiums increases for CDI-regulated insurance policies
would range from $0.1753 per member per month (PMPM) for
large group policies to $5.2370 PMPM for individual
policies. The impact in DMHC-regulated plans would range
from $0.2270 for small group to $1.0308 for individual
contracts. Medi-Cal HMOs, and Healthy Families Program
HMOs would have no impact.
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The estimated premium increases in the individual market
may result in approximately 3,000 persons dropping
insurance coverage.
Public health impact
Some of the many consequences of diabetes-related
conditions include kidney failure, debilitating neuropathic
pain, and/or amputations. Although SB 1104 would increase
coverage for a relatively small population, it may have a
substantial impact for this group. Reducing expenses for
previously uncovered treatments, treating early stages of
diabetic nephropathy, reducing symptoms related to
diabetes-related complications, or improving mobility
through coverage of DME and prosthetics, especially for
those who have delayed or foregone care due to lack of
coverage, will improve the health status, quality of life,
and productivity for the enrollees who utilize those new
benefits.
Increased utilization of medical treatments (i.e., walkers,
prosthetics, or wound dressings) is likely to delay or
reduce complications such as amputation, and increased
utilization of outpatient prescription medication is likely
to delay or reduce complications such as neuropathic pain,
kidney failure, or premature death.
Mandating coverage for diabetes-related complications may
also reduce economic losses, such as lost work days or
decreased work productivity, due to enrollees with new
coverage experiencing improved control of symptoms from
diabetes-related complications or improved mobility, but
the magnitude cannot be estimated.
Prior legislation
SB 64 (Solis and Sher), Chapter 540, Statutes of 1999,
requires every health plan and health insurer to provide
coverage for the management and treatment of diabetes,
including equipment, supplies, medications, outpatient
self-management education and medical nutrition therapy as
medically necessary or medically appropriate.
ACR 114 (Coto, Chu, Baca, Ridley-Thomas, Bermudez, Evans,
Frommer, and Garcia), Resolution Chapter 151, Statutes of
2006, established the Legislative Task Force on Diabetes
and Obesity to study the factors contributing to the high
rates of diabetes and obesity in Latinos,
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 10
African-Americans, Asian Pacific Islanders, and Native
Americans in this country, and directed the task force to
prepare a report containing recommendations regarding ways
to reduce the incidence of diabetes and obesity in these
ethnic groups.
ACR 145 (Cardenas), Resolution Chapter 123, Statutes of
2000, designated November 2000 as Diabetes Awareness Month
and found, among other things, that 1) diabetes is a
leading health problem in California with an estimated two
million residents having the disease, one of the highest
rates of diabetes in the nation; and, 2) each year diabetes
and diabetes related illnesses, such as amputations, loss
of eyesight, and even death affect the lives of millions of
Californians.
AB 520 (Cedillo) of 1999 would have required the Medi-Cal
program to cover: 1) equipment and supplies related to the
management and treatment of diabetes; and, 2) 24 hours of
diabetes outpatient self-management training and education.
Failed passage out in Assembly Health Committee.
Arguments in support
The California Podiatric Medical Association writes in
support, stating that insurers place unreasonable and
onerous obstacles to patients seeking coverage for the
treatment of DPN, such as inconsistent step therapies and
slow pre-authorization processes. This causes unnecessary
delays in accessing care for patient.
The Foundation for Peripheral Neuropathy supports this
bill, stating that many patients have been successfully
taking DPN pain medications for many years only to learn
that their health plan will no longer provide coverage.
DPN accounts for more diabetes related hospitalizations
than any other complications and under managed DPN is the
number one cause of non-traumatic lower limb amputations in
the U.S.
The Latino Diabetes Association supports SB 1104, stating
that DPN is a painful foot condition that many diabetics
suffer from in silence.
The National Kidney Foundation (NKF) writes in support,
stating that chronic kidney disease (CKD) is inexorably
linked to diabetes. In its early stages, CKD may have no
STAFF ANALYSIS OF SENATE BILL 1104 (Cedillo)Page 11
symptoms. Affected individuals may not notice symptoms
until kidney function is less than 1/10 of normal. NKF
further states that diabetes is the single leading cause of
kidney failure in the U.S., accounting for nearly 45
percent of people who start treatment for kidney failure
annually.
Arguments in opposition
The Association of California Life and Health Insurance
Companies (ACHLIC) opposes the bill, arguing that requiring
all plans to include specific benefits is counterproductive
to efforts to make health insurance more affordable and
available to Californians.
Health Net writes in opposition to SB 1104 stating that
health plans and insurers are already required to cover
diabetes, including coverage and treatment of complications
arising from diabetes. Health Net points out that there is
no evidence from regulators that enrollees and insureds are
not receiving appropriate treatment for persons suffering
diabetes-related complications, and question the need for
the bill.
COMMENTS
1.Why single out one diabetes-related complication over
another? The bill specifies that diabetic peripheral
neuropathy is a diabetes-related complication, but there is
no evidence suggesting that diabetic peripheral neuropathy
is more problematic or occurring at higher rates than other
diabetes-related complications. It is unclear why this
complication would be singled out, when the author has
indicated that they intend the mandate to provide coverage
for all diabetes-related complications. This could be
potentially interpreted as an exclusionary list of
complications related from diabetes. A suggested amendment
would be to add other common diabetes-related complications
or not list any at all to avoid future confusion.
2.Clarify coverage for outpatient medications. Not all plans
and policies have an outpatient pharmacy benefit. As
written, it is unclear if the author intends to require
those plans that currently do not have an outpatient
pharmacy benefit to also provide coverage for outpatient
prescription drug coverage necessary to treat enrollees
with diabetes-related complications.
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3.Prevalence of diabetes on the rise. Annually, there are
1.6 million new cases of diabetes diagnosed in people age
20 years and older. According to the CDC, the rate at
which Americans are diagnosed with diabetes rose by more
than 90 percent among adults over the last 10 years. If
this trend continues, this mandate will likely impact a
higher percentage of insured Californians.
POSITIONS
Support: California Academy of Physician Assistants
California Healthcare Institute
California School Employees Association
California Podiatric Medical Association
Foundation for Peripheral Neuropathy
Latino Diabetes Association
National Kidney Foundation
One individual
Oppose: Association of California Life and Health
Insurance Companies (ACHLIC)
Health Net
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