Staff Analysis of Act 34 Requirements
(in response to the eight requirements of Act 34, Sec. 9)

Act 34 provides that the documentation submitted to the Council by supporters and opponents of a proposed mandated benefit should address eight specific areas. In reviewing these eight points, Council staff performs a preliminary review to determine whether the information received is sufficient to warrant the formal Mandated Benefits Review process outlined in the Act. Following are Council staff findings pertaining to the documentation received for House Bill 656 addressing each of these eight points.

The discussion of these issues will focus exclusively on the diabetes portion of House Bill 656 as the Council received only minimal information addressing the hearing aid benefit. The proposed coverage for hearing aids is discussed in the section entitled "Amendments to House Bill 656."

Summary of the Responses to the Eight Categories Required by Act 34

In general, supporters of House Bill 656 contend that the proposed benefits for diabetic supplies, medication, and education would help prevent complications resulting from diabetes, improve the quality of life for diabetics, and relieve diabetics of a financial burden. Furthermore, there is evidence that financial savings may be achieved in the long term through a decrease in the number of hospitalizations and complications.

Typically, opponents of mandates such as those proposed under House Bill 656 include insurers and purchasers of health care coverage. While there is opposition to mandates in general and insurers and purchasers raised concerns about this bill, the Council received limited information suggesting specific opposition to the diabetes portion of this particular mandate. (The opposition to the proposed benefits for hearing aids was quite strong.) The Council notes for example, that the Insurance Federation of Pennsylvania supports the proposed benefits for diabetic supplies, medication, and education. Their submission stated, "The Insurance Federation of Pennsylvania recommends that the Health Care Cost Containment Council approve the captioned bill [House Bill 656] mandating the coverage of diabetic supplies and equipment and self management training for diabetics."

Detractors assert, however, that improved coverage alone will not prevent diabetic complications. Patient cooperation in monitoring of blood glucose levels, diet, and lifestyle changes is an essential part of the equation.

Specific Responses to the Eight Categories Required by Act 34

  1. The extent to which the proposed benefit and the services it would provide are needed by, available to and utilized by the population of the Commonwealth.

In 1995, there were an estimated 1.1 million Pennsylvanians living with diabetes. The American Diabetes Association estimates there were:

This suggests that 1 out of every 11 Pennsylvanians is suffering from diabetes.

Pennsylvania had the third highest diabetes age-adjusted death rate in the nation between 1992 and 1994. According to the Centers for Disease Control and Prevention, over 3.5 million Pennsylvanians are considered to have an increased risk for developing diabetes because of obesity or family history. Diabetes incidence rates increase dramatically with age. As Pennsylvania has an aging population, this is cause for concern.

Diabetes affects people in all areas of the Commonwealth. One submission contained an article from the Philadelphia Inquirer which further discussed the impact diabetes has on the Commonwealth. The author stated, "in some rural areas, the impact has been especially devastating. Nine areas of Pennsylvania, covering 18 counties, had death rates that were double or triple the national rate for the period 1989 - 1992, federal data show. The nine [areas] were among 80 areas with the highest death rates in the United States, according to the federal Centers for Disease Control and Prevention. Three - Tioga, Luzerne and Mercer Counties - ranked among the 20 areas with the highest death rates nationally." (Gaul) In the Philadelphia and Pittsburgh areas, there are large pockets of African Americans, a population almost twice as likely to have diabetes as a Caucasian of the same age. In Southeastern parts of the state, such as Lancaster, Berks, and Lehigh counties, are sizable populations of Hispanics, also twice as likely as Caucasians to have diabetes.

Many Pennsylvanians suffer from diabetes-related complications. The Council's data indicate 262,000 diabetes-related hospitalizations each year in Pennsylvania. The American Diabetes Association estimates that diabetes is a leading cause of death by disease in Pennsylvania, accounting for approximately 11,600 deaths annually. In addition:

  1. The extent to which insurance coverage for the proposed benefit already exists, or if no such coverage exists, the extent to which this lack of coverage results in inadequate health care or financial hardship for the population of the Commonwealth.

Based on the information submitted to the Council, it appears that coverage of diabetic supplies and education is a widely offered benefit. In their submission, the Insurance Federation stated, "From the outset it was clear that there was no great opposition from insurers to providing this benefit [diabetic supplies, medication, and education] through major medical policies. For one thing, many managed care plans and indemnity providers already offered it ... "

It should be noted, however, that these benefits might not be covered through the base benefit plan. For example, Highmark stated, "employer group plans provide coverage for diabetic supplies and education through a prescription drug and durable medical equipment rider or Major Medical." Highmark also noted that, "For the most part, these services are covered, however some employer groups may have chosen not to purchase the additional riders or Major Medical coverage and therefore the services provided under House Bill 656 would not be covered."

The American Diabetes Association stated that at the 1997 House Insurance Committee hearing, "many people said in their testimony that their health insurance was inconsistent in providing coverage for diabetes supplies and education. Dr. Ann Craig and Dr. Ruth Ann Fitzpatrick stated at the hearings, 'Currently many health care providers only cover blood glucose monitoring strips and meters for those individuals using insulin to manage their disease. Often they do not cover insulin, syringes, insulin pumps, oral agents, blood glucose meters or blood glucose testing strips (for people not using insulin) and other necessary supplies. These items, however, are necessary for people with diabetes to stay healthy and avoid complications'."

In some cases, the insurance coverage may also appear to be illogical. One popular anecdote is that while insurers may cover the cost of insulin, they may not cover the cost of the syringes needed to inject the insulin. Another example is that both Type 1 and Type 2 diabetics are recommended to test their blood glucose levels regularly (although Type 2 diabetics do not need to test their blood as often as Type 1 diabetics). However, coverage of certain supplies, such as testing strips, may be limited to Type I diabetics-a group that comprises only 5% to 10% of diabetics.

The federal government recently recognized the need for all diabetics to have access to blood glucose testing equipment, regardless of whether or not they use insulin. Until recently, Medicare would only reimburse insulin-using diabetics for blood glucose monitors and testing strips. Effective July 1, 1998, Medicare now covers the cost of blood glucose monitors and testing strips for all diabetics.

Many insurers already recognize the need for diabetics to be educated about their disease and the ways in which they can manage it. Insurers often extend this benefit to both Type 1 and Type 2 diabetics. For example, Highmark provides a Diabetes Management Program for both Type 1 and Type 2 diabetics and their families. HealthAmerica stated that they, "offer a large array mf diabetic education classes to all diabetics at no or low out-of-pocket expense." Blue Cross of Northeastern Pennsylvania stated, "Diabetes education is presently a covered benefit but only when the program is certified by the Department of Health or the American Diabetes Association." Based on these submissions, it would appear that some insurers not only see the importance of education and self-management training but are also willing to cover such services.

While a proper diet is considered essential to effectively managing diabetes, insurance coverage for services provided by dieticians varies greatly among insurers. According to the Pennsylvania Dietetic Association, one insurance company provides diabetics with coverage for nutritional visits under certain conditions (dependent on whether the Registered Dietician providing the service is a Certified Diabetes Education and/or is affiliated with a particular diabetes care program). The Pennsylvania Dietetic Association also notes that any enrollee of this insurer, diabetic or not, may self-refer to a dietician at any of six insurer-operated facilities. These benefits for nutritional counseling are also available to Medical Assistance recipients who use the managed care plan operated by this insurer.

Another insurer, according to the Pennsylvania Dietetic Association, has one dietician on staff to cover their nine offices. The services of this dietitian are available to any enrollee of this insurer. The insurer allows members to see a different dietician for the initial visit, if the dietician is approved by the insurer. All subsequent visits, however, must be with the staff dietician.

The Pennsylvania Dietetic Association stated that another insurer does not reimburse for nutrition services for any patient, including diabetics. A physician may request that a patient's visit to a dietician be covered, but coverage may be denied. The Pennsylvania Dietetic Association noted that, "In the Philadelphia area and parts of central Pennsylvania, dieticians are contracted as Preferred Providers. In that role, physicians may refer patients to them and [the insurer] will pay for the service."

On the issue of financial hardship incurred by diabetics, the American Diabetes Association submitted an article which stated, "Those with diabetes ... incurred 10% - 20% higher out-of-pocket expenses for hospital outpatient and emergency services [than people without diabetes]." This article also stated, "Americans with diabetes have two to five times higher per capita total medical expenditures and per capita out-of-pocket expenses than people without diabetes. These expenses and their associated loss of productivity have impact not only on diabetic patients and their families, but on federal and state governments and society as a whole." (Javitt) The article also noted the following:

If insurance does not cover the cost of diabetic supplies, medication, and education, the patient may have significant out-of-pocket expenses. Letters received by the Council suggest annual out-of-pocket expenses for non-insulin dependent diabetics average $1,800. The annual out-of-pocket expense for an insulin dependent diabetic may be higher. These costs are for typical supplies including testing strips, medications (including insulin), and physician visits which insurance may not cover.

For some people, $1,800 in annual out-of-pocket expense provides a financial barrier to effectively managing their diabetes. Some pemple can not or choose not to invest a significant amount in managing their disease. Some may reduce the frequency of blood sugar testing. Others may reuse lancets and syringes. Yet others may cut testing strips in half. Some may not enroll in an outpatient diabetes education course and instead need to have inpatient education after being admitted to a hospital.

The Council notes that an article submitted by the American Diabetes Association stated that, "Few studies have investigated whether the lack of health insurance has adverse effects on people with diabetes." The article continued, "comparing diabetic persons age 18-64 years with and without health insurance, shows few differences between the two groups in the proportion who report complications related to diabetes." The article further stated, "Lack of health insurance in the 1989 NHIS [National Health Interview Survey] was associated with low income but not with an increased rate of diabetic complications." (Harris)

In summary, The Council notes that benefits vary among insurers. Further, it appears that for some people, the costs associated with care of their diabetes provide a financial barrier to appropriate health care.

  1. The demand for the proposed benefit from the public and the source and extent of opposition to mandating the benefit.

The Council received formal submissions in support of the proposed benefits from the American Diabetes Association, the Pennsylvania Dietetic Association, the American Association of Diabetes Educators, and the Pennsylvania Pharmacists Association. In addition to the support received from such groups, the proposed coverage for diabetic supplies and education was also supported by the Insurance Federation. This support was particularly noteworthy to the Council. It should be noted, however, that the support of the Insurance Federation was contingent upon the removal of the proposed coverage for hearing aids.

The Council also received letters supporting House Bill 656 from over 100 Pennsylvania residents. These letters suggest that some people experience financial difficulty in purchasing supplies and medication to manage their diabetes. Some letters also suggested that some people may not care for their diabetes properly because of the expense required to do so.

Health insurers and businesses are typically the main opponents to mandated benefit bills. They argue that mandates are an unwelcome intrusion into the marketplace, contribute to rising health care costs, and affect the ability of people to afford health insurance. In this case, however, specific opposition to coverage for diabetic supplies, medication, and education was limited.

One possible reason for limited opposition is that House Bill 656 is the collaborative effort of several parties. This particular bill, as the Insurance Federation stated, "is owing to some unique background and the cooperation of insurers and the ADA [American Diabetes Association] to adopt it in its most palatable form."

While the specific opposition to the diabetes portion of this particular mandate was limited, there were some cautions. There were assertions that improved coverage alone will not prevent diabetic complications. Patient cooperation in monitoring of blood glucose levels, diet, and lifestyle changes is an essential part of the equation. Further, information submitted by Independence Blue Cross cautioned that, "The proposed diabetes mandate legislation establishes a significant precedent. It would require coverage for drugs and durable medical equipment for only one disease. The same argument for prescription coverage can be made for many other chronic diseases (epilepsy, hypertension, psychosis for example)."

Insurers and purchasers of health care were clear in their opposition to mandates in general. Some expressed opposition to all mandates. They note, in particular, the correlation between the number of mandates and the increasing cost of health insurance, the increasing number of uninsured, the increased incentive for large employers to self insure, and the decreasing number of employees covered by employer sponsored health insurance. They expressed concern, too, about the cumulative financial effect of enacting mandates.

The American Family Life Assurance Company suggests that supplemental health insurance policies be excluded from the bill (accident-only, specified disease, hospital indemnity, Medicare supplement, long-term care, disability income or other limited benefit health insurance). They argue that these policies are of limited nature and fill the gaps "between what is covered by comprehensive insurance and the total financial impact of an illness or injury." They state, "Not only is there no need for this type of mandate to include supplemental insurance, there is also no public demand for it."

From the supporting submissions and personal letters the Council received, it appears that there is demand for this coverage. While there is general opposition to mandates from insurers and purchasers of health care, there was not significant opposition specific to the diabetes portion of this particular bill.

  1. All relevant findings bearing on the social impact of the lack of the proposed benefit.

As previously discussed, diabetes affects 1 in every 11 Pennsylvanians; it places a burden on many families throughout the Commonwealth. Diabetes disproportionately affects African Americans and Hispanics. In addition to an increased risk of heart disease and stroke, diabetes can cause complications such as blindness, kidney disease, and lower-extremity amputations.

Due to complications, diabetes causes disability and premature death. The American Diabetes Association found that:

The Council recognizes the social implications of diabetes and is sympathetic to the plight of those with this disease. With tight monitoring of blood glucose levels, some diabetic complications may be prevented or delayed. It is the position of the American Diabetes Association, "that if people with diabetes are provided coverage for diabetes equipment and supplies, they will test and maintain normal blood glucose levels." Improved self-management may improve the quality of life for diabetics in Pennsylvania.

  1. Where the proposed benefit would mandate coverage of a particular therapy, the results of at least one professionally accepted, controlled trial comparing the medical consequences of the proposed therapy, alternative therapies and no therapy.

House Bill 656 does not mandate coverage of a particular therapy. Proponents, however, submitted the following information regarding "intensive therapy" in response to this point. Intensive therapy is essentially using insulin doses to imitate the way a normal pancreas supplies insulin to the body. For example, it may require a shot of insulin before every meal and another shot before going to bed. Intensive therapy is not simply more insulin. The submission from the American Diabetes Association included an article which stated, "The Diabetes Control and Complications Trial (DCCT), ... proved that tight blood glucose control prevents or delays complications. In fact, the results were so clear-cut that the study was stopped before schedule." (McCarren) In this study, intensive therapy demonstrated:

The Pennsylvania Dietetic Association submitted an article which also addressed the issue of intensive therapy. The article stated, "On average, intensive therapy patients will experience 7.7 additional years of sight, 5.8 additional years free from ESRD [end stage renal disease], and 5.6 additional years free from lower extremity amputation compared with conventional therapy patients. Intensive therapy is thus associated with a 5.1 year increase in survival." (JAMA 1996)

  1. Where the proposed benefit would mandate coverage of an additional class of practitioners, the result of at least one professionally accepted, controlled trial comparing the medical results achieved by the additional class of practitioners and those practitioners already covered by benefits.

House Bill 656 does not call for another class of practitioners. Since some insurers currently offer nutritional services and diabetes education, the Council does not believe that either Registered Dieticians or Certified Diabetes Educators are considered to be an additional class of practitioners.

  1. The results of any other relevant research.

In response to this requirement, the American Diabetes Association, the Pennsylvania Dietetic Association, and the American Association of Diabetes Educators provided the Council with numerous studies. Although this analysis does not allow for a full discussion of all of the articles, findings are summarized below:

  1. Evidence of the financial impact of the proposed legislation, including at least:

(A) The extent to which the proposed benefit would increase or decrease cost for treatment or service.

Utilization of the diabetes benefits is expected to increase, so the total cost associated with diabetes maintenance would also increase. Information provided by Independence Blue Cross suggested that approximately 66% of their subscribers currently have a prescription rider which covers the cost of insulin. They stated, "To provide insulin to the remaining subscribers [of Independence Blue Cross] would cost approximately $1.7 million annually. Supplies would add another $300,000." They also stated that, "orthotics could be a potential high cost item", but did not provide any specific estimates of the cost for the proposed orthotics benefit.

Total cost estimates for enacting the diabetes portion of House Bill 656 may cost between $171 and $256 million annually.

On the other hand, treatment of diabetes is costly. One contributing factor to the costs associated with diabetes is that diabetes is a chronic disease. There is no cure for diabetes, only methods of managing it. As such, providing for the treatment and complications of diabetes puts an enormous financial strain on our health care system. For example, according to one source, "When the direct cost of medical care for all 3.1% of Americans with diabetes is considered, the total cost represents nearly 12% of the total U.S. health-care expenditures." (American Diabetes Association) According to another report from the American Diabetes Association, "A study that examined the treatment of both diabetes and nondiabetes reported that per capita annual health care expenditures in 1992 were more than three times greater for people with diabetes than for people without diabetes ($9,493 vs. $2,604, respectively) and that nearly 15% of national health care expenditures were spent on treating people with diabetes." ..."Costs escalate as a result of diabetic complications, many of which can be prevented." (Levetan)

While increased utilization will increase costs, dollars spent "up front" to cover diabetes self-management has the potential to save health care costs in the long term.

(B) The extent to which similar mandated benefits in other states have affected charges, costs and payments for services.

To date, 29 states have enacted mandates for diabetic supplies and/or education. The majority of these mandates were enacted only recently (14 states enacted mandates in 1997 and 5 states enacted mandates in 1998), so there is little information concerning the impact these mandates have had.

The first state to enact a diabetic supplies and education mandate was Wisconsin. The submission from the Pennsylvania Dietetic Association discussed a study done by the Wisconsin Office of the Insurance Commissioner. "The insurance commissioner found that directing the private insurance community to offer a comprehensive diabetes benefit did not increase costs compared to other benefits and did not increase premiums."

The submission from the Insurance Federation stated, "Insurers take some comfort from the fact that diabetes coverage was mandated in Connecticut effective October 1, 1997 with an estimated cost impact of only 0.1%. Likewise, diabetes treatment was passed in Indiana effective January 1, 1998, and is expected to have a similar effect."

One article, submitted by the American Association of Diabetes Educators, discussed the impact of a Diabetes Care Program sponsored by the State of Maryland. The program is a Medicaid managed care program which focuses on preventive care. This article notes that for some of those enrolled in the program, "total average annual Medicaid payments per person decreased from $5,271 during the preprogram period to $3,533 during the postprogram period." (Stuart) The article also noted decreases in:

The American Diabetes Association also submitted a report on the Maryland Diabetes Care Program which noted that in 1993, the average expenditure for a patient in the program was approximately $4,405 less than the average expenditures for patients who were not in the program. In 1994, the difference grew to $4,597.

The American Diabetes Association also submitted a report from a diabetes self-management training and education program in Maine. The study demonstrated a 32.2% reduction in hospitalizations for those persons going through the program and receiving follow-up one year later. Further, this report noted that, "this figure demonstrated a savings of $237,885 for that population or $293 per participant." (State of Maine Department of Human Services)

Both Maryland and Maine were able to reduce Medicaid expenditures by providing benefits to their diabetic population. Both states have since enacted mandates for insurance coverage of diabetic supplies and education (Maine in 1996, Maryland in 1997).

(C) The extent to which the proposed benefit would increase the appropriate use of the treatment or service.

The issue of increased utilization is central to the discussion of House Bill 656. Proponents argue that some diabetics may not currently follow generally accepted standards of treatment (including regular blood glucose testing and self-management training) because of the out-of-pocket costs involved.

For example, one letter sent by a Pennsylvania resident stated, "I regret that I do sometimes reuse my needles. I would like to check my sugar more often but the expense is too costly, so I don't take care of my sugar like I would like to. ... Someday I know I will regret this, but for now there seems no other choice." Proponents assume that this resident represents many other diabetics throughout the Commonwealth who know how to care for their disease but cannot do so properly because of cost issues.

In their submission, "The American Diabetes Association believes that if people with diabetes are provided coverage for diabetes equipment and supplies, they will test and maintain normal blood glucose levels."

In addition, proponents claim that physicians may not be able to offer the best care because of lack of reimbursement. An article submitted by the American Diabetes Association states, "The primary care provider may be disinclined to refer for needed services such as diabetes education if these services are not covered in managed care contracts."(Armbruster) The submission of the Pennsylvania Dietetic Association would appear to support this position. They state, "While the extent to which the proposed benefit would increase the appropriate use of the treatment or service is largely contingent upon increased awareness of the general public as well as upon improved use of diagnostic techniques, it is assumed that physicians will be more willing to refer patients to dieticians when patients no longer have to pay out of pocket for the service."

Others argue that providing coverage for supplies and education may increase unnecessary treatments. Highmark's submission states, "Enactment of this legislation could potentially increase the unnecessary purchase of blood glucose monitors, injection aids and insulin infusion devices if medical restrictions are not imposed."

The submission from HealthAmerica states, "all studies indicate that education, knowledge, and compliance are also key factors to maintaining the health of a diabetic. One component without the others is not an effective means to control diabetes. ... Without the cooperation of the diabetic, no amount of testing will provide the desired outcome."

Although proponents argue in general that increased insurance coverage will increase appropriate self-management, education, and nutritional therapy, this issue does not rest solely on insurance coverage but also depends upon the diabetics' cooperation in managing their disease.

(D) The impact of the proposed benefit on administrative expenses of health care insurers

Submissions provided only cursory information on this area. The American Diabetes Association noted that, "By people with diabetes following the standards of care from the DCCT [Diabetes Control and Complications Trial], it would cause a slight increase in treatment services leading to a nominal increase in administrative expenses." Since an increase in claims filing may occur due to enactment of House Bill 656, it would stand to reason that administrative expenses may also occur. In addition, the Council notes that there may be administrative expenses as a result of incorporating the changes into insurance policies and reissuing affected policies. Highmark stated, "that the increase in administrative expenses as a result of enactment of House Bill 656 will be minimal."

Given the minimal information provided above, the Council notes that insufficient information was received to estimate the precise impact of the proposed benefit on administrative expenses of health care insurers.

(E) The impact of the proposed benefits on benefits costs of purchasers.

With regard to this issue, the American Diabetes Association again noted the study conducted by the Wisconsin Office of the Insurance Commissioner, in which enactment of a diabetic supplies and education mandate in 1991 did not result in increased premiums.

Others, however, note that it is logical that the cost of premiums might rise if purchasers are required to add options which they did not previously have. According to Highmark, "Whenever a benefit is added to an insurance product, the cost will increase in part due to increased utilization. These costs are then passed onto consumers, primarily employers, labor groups, and individuals."

The submission from HealthAmerica stated, "Employers should have the right to choose the benefit package that best suits their needs and their ability to pay. Mandated benefits drive up costs to all, employers, employees, insurers, and our government medical programs. In the final analysis every tax payer will have the costs of insurance rise even if they do not receive any benefit from the mandate."

Highmark noted that, "While the cost of mandated benefits varies, it is the cumulative costs that hurts all purchasers of health insurance coverage, with the exception of self-insured groups." They provided documentation to support this position. For example, according to the Highmark submission, "the adoption of new mandated benefits and/or provider groups generally does not benefit the group for which it was originally intended-millions of other lives are impacted in ways in which those individuals proposing the coverage may not have considered." The Highmark submission further notes that "The 'Record of the Society of Actuaries, Volume 16, Number 1' states the following regarding mandated benefits and the benefits cost of purchasers:

The submission from the Pennsylvania Business Roundtable is also concerned that legislative mandates impose a financial burden on businesses providing benefits to their employees. They state, "The additional costs [associated with mandates] are not imposed of those businesses that provide no such benefits. Clearly, placing an impediment is misguided and detrimental to an improved Pennsylvania business climate. Businesses who do not provide benefits such as health insurance are not affected."

Although informative, the general information provided was not sufficient to determine the specific impact of this proposed mandate on the benefits costs of purchasers.

(F) The impact of the proposed benefits on the total cost of health care within the Commonwealth.

Regarding the issue of overall health care costs, it is important to note that the costs for covering diabetic supplies is estimated to be quite high (ranging from $171 million to $256 million). On the other hand, the costs for treating diabetes reaches billions of dollars. The Council's inpatient data indicates hospital charges of almost $4.4 billion a year. This figure represents 262,000 hospitalizations and over 1.7 million days in the hospital. The average charge is approximately $17,000 per hospitalization, and the average length of stay is 6.5 days. According to the American Diabetes Association, the total cost of diabetes in Pennsylvania is over $6.7 billion annually.

According to a report from the American Diabetes Association, " ... per capita annual health care expenditures in 1992 were more than three times greater for people with diabetes than for people without diabetes ($9,493 vs. $2,604, respectively) and that nearly 15% of national health care expenditures were spent on treating people with diabetes."

The American Diabetes Association stated, "Although the proposed benefit would increase low cost diabetes services, such as diabetes education and dietary consultation, it would decrease the high cost of hospitalizations for kidney transplants, dialysis, heart attacks, strokes, ketoacidosis, diabetic comas, and amputations." In doing so, the American Diabetes Association estimates that over $1 billion of the $6.7 billion diabetes related costs in Pennsylvania could be saved every year.

Using the Council's data, we suggest that there could be substantial savings-$877 million in hospital charges-if hospitalizations decreased by 20 percent a year. With regard to complications, if lower-extremity amputations decreased by 20 percent, over $31 million in hospital charges could be saved. A 20 percent decrease in hospitalizations for renal complications suggests a savings of over $111 million in hospital charges.

There is evidence that preventive care for diabetes can produce a cost savings. The Lewin Group recently examined a comprehensive program of the Diabetes Treatment Centers of America, which manages all the health care needs of members with diabetes. Results showed a 12.3 percent reduction in first-year health care costs. According to the president of The Lewin Group, "These outcomes support the fact that medical expenditures for people with diabetes can be reduced while increasing the level of appropriate care. ... Moreover, it can be expected that savings will increase over time, as costly complications are avoided." The Lewin Group analysis found that hospital admissions decreased 18 percent and bed days decreased by 22 percent in the first year. According to a representative of the Diabetes Treatment Centers of America, "Payers around the country now have real-world evidence that investing in a population management program for the members with diabetes will pay off quickly. ... And, by expanding rather than limiting care for people with diabetes, we can help the health care industry reduce the financial burden of diabetes on the economy."

The American Diabetes Association also submitted a report from Milliman & Robertson that noted the following:

This report appears to verify the American Diabetes Association that although costs for supplies, education, and nutritional counseling may increase, the net effect will most likely be a reduction in the total cost of health care in Pennsylvania. The benefits analyzed by Milliman & Robertson, however, did not include insulin, oral medications, insulin pumps, and orthotics, all of which are included in House Bill 656.

The American Diabetes Association also stated, "Employers are currently bearing the costs related to diabetes-related complications. ... Employers also endure the expense of lost production due to illness and premature mortality from diabetes. The loss of productivity is the highest indirect cost associated with diabetes."

House Bill 656 might be considered an exception, not the rule, in discussing the impact mandated health benefits have on the total cost of health care. Although not specifically addressing the benefits proposed under House Bill 656, there are studies which link increased health insurance premiums to an increase in the number of uninsured. For example, according to a 1997 Lewin Group study, every one percent real increase in private insurance premiums results in 400,000 additional uninsured Americans.

To illustrate this point further, Highmark submitted a study conducted by the economists at the U.S. Department of Health and Human Services' Agency for Health Care Policy and Research. This study found that, "The 90 percent increase in health insurance premiums observed between 1987 and 1993 far exceeded the rise is wages and salaries (28 percent) during that period." The study states, "Rising [insurance] premiums may discourage firms from offering insurance, and higher employee contribution rates may cause some workers to decline coverage when it is offered." The study further states, "Many states have adopted legislation that mandated specific types of insurance benefits ... Much of this legislation was designed to enhance insurance coverage and improve health plan generosity, but it may have contributed to the rise in health insurance costs." (Cooper)

Increases in the cost of health care can also have an impact on the cost of business. According to figures published by the Pennsylvania Chamber of Business and Industry, Pennsylvania employers pay more than $10 billion in health care premiums annually. Any 1% increase in the cost of health care translates to a $100 million increase in the cost of business in the Commonwealth.

While these submissions do not specifically address the proposed coverage for diabetic supplies and education, they suggest a link between health insurance mandates and rising health care costs.

With regard to this particular mandate, however, preventative care for diabetes may be effective in reducing the risk of complications and coverage of diabetic supplies may be a potentially cost saving measure in the long term.