Diabetes affects nearly 24 million people in the United States, an increase of more than 3 million in just two years. The Diabetes epidemic cost the U.S. economy more than $200 billion each year in medical expenses and lost productivity. This presentation outlines the challenges and proposes practical proven solutions aimed at improving outcomes while reducing the cost of treating Medicaid eligible Texans with diabetes.

1. The Diabetes Epidemic and Potential Reduction In the Cost of Treating Medicaid Eligible Texans with Diabetes Prepared by Richard Thoennes, Healthcare Consultant with more than 15 years experience providing solutions for Managed Care, Retail Drug, Drug Wholesalers and Durable Medical Equipment Companies aimed at Improving Healthcare Delivery & Outcomes while Maximizing Profits & Reducing Costs November 2010

3. Prevalence of Diabetes, US and Texas, 1995 - 2008* *Source: Texas Diabetes Institute utilizing CDC Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008, for persons who are eighteen years of age and older, and include both Type 1 and Type 2 Diabetes. Persons with diabetes include those who report that they have been told by a doctor that they have diabetes. Diabetes in Texas, 2008* 9.7% Diabetes in US, 2008* 8.3%

4. Texas Projected Diabetes Cases 2000 - 2040*

5. Diabetes Prevalence by Race/Ethnicity, 2008* *Source: Texas Diabetes Institute using Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008. Note: All reported rates (%) are weighted for Texas demographics and the probability of selection and thus are not derived from the simple division of numerator and denominator cases. Diabetes Prevalence by Educational Level, TX, 2008* Diabetes Prevalence Texas, 2008* Area: Texas 9.7% 1,205,993 Race/Ethnicity Prevalence Estimated # of People White, non-Hispanic 8.3% 736,987 Black, non-Hispanic 13.0% 251,543 Hispanic 11.1% 680,351 Other 7.5% 59,389 Educational Level Prevalence No High School Diploma 14.2% High School Graduate 9.7% Some College 9.8% College + 6.9%

7. *Source: Texas Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008 adjusted to reflect 2010 Texas Population: 23,904,380 $16.8 Billion $4.3 Billion The Economic Cost of Diabetes in Texas The Estimated Economic Cost of Diabetes in the US is $174 Billion, or $7.25 Billion for each 1 million people with Diabetes. The estimated 2010 population of Texans with diabetes is approximately 2,318,724* The 2010 Estimated Economic Cost of Diabetes in Texas is $16.8 Billion Approximately 6.3 million adults in the U.S. with diabetes - are unaware they have the disease, and this undiagnosed population accounts for an estimated $18 billion in health care costs each year. An estimated 597,609* Texans have undiagnosed diabetes The 2010 Estimated Cost of Undiagnosed Diabetes in Texas is $4.3 Billion

8. Source: Texas Medicaid Managed Care Encounter Database, Institute for Child Health Policy Data Source: FFS and PCCM data were selected from the Texas Medicaid and Health Partnership (TMHP) Ad Hoc Query Platform (AHQP) Claims Universe. Note: Medicaid Fee-For-Service (FFS) and Patient Care Case Management (PCCM) Expenditures for Diabetes-Related Services, SFY 2006 Medicaid Managed Care Expenditures for Diabetes-Related Services, SFY 2006 Note: Diabetes-Related Services is defined as claims with any diagnosis of ICD-9-CM 250 . Texas Medicaid Diabetes-Related Services Eligibility FFS and PCCM clients only Percentage of clients with service Diabetes Clients Diabetes Claims Claims per client Reimbursement Paid Dollars per client Dollars per claim 20 and younger 2,354,424 0.40% 9,689 52,716 5.44 $15,164,890 $1,565.17 $287.67 21 and older 1,120,718 21.20% 238,116 2,724,096 11.44 $393,270,158 $1,651.59 $144.37 Eligibility FFS and PCCM clients only Percentage of clients with service Diabetes Clients Diabetes Claims Claims per client Reimbursement Paid Dollars per client Dollars per claim STAR under 21 1,252,550 0.30% 3,559 17,113 4.81 $3,834,545 $1,077.42 $224.07 STAR over 20 150,517 3.00% 4,457 24,586 5.52 $5,684,861 $1,275.49 $231.22 STAR Plus 68,460 11.50% 7,873 86,311 10.96 $24,812,533 $3,151.60 $287.48

9. Diabetes in Texas CHIP, SFY 2007 Source: Texas CHIP Encounter database, ICHP August 2008 Unduplicated total number of children enrolled: 554,554 Total Capitated dollar amount paid by Texas for all CHIP children: $322,054,465 Type 1 Diabetes Type of encounter Number of encounters Number of Members Estimate Paid Inpatient 899 119 $736,415 Outpatient 1,060 425 $157,453 Physician/Supplier 16,525 1,059 $1,333,845 Total: 5,021 1,316 $2,227,713 Type 2 Diabetes Type of encounter Number of encounters Number of Members Estimate Paid Inpatient 108 30 $118,346 Outpatient 327 232 $71,149 Physician/Supplier 4,586 1,215 $275,841 Total 5,021 1,316 $465,335

10. 2006 Texas Medicaid & CHIP(2007) Diabetes-Related Services 2006 Reimbursement Paid: $445,460,035 2006 : Enrollees with Diabetes 273,736 Source: Texas Medicaid Managed Care Encounter Database, Institute for Child Health Policy & Texas CHIP Encounter database, ICHP August 2008 Reimbursement Paid Total Enrolled Diabetes Clients Percentage of clients with service Medicaid Fee-For-Service SYI 2006 $408,435,048 3,475,142 247,805 7.13% Medicaid Managed Care SYI 2006 $34,331,939 1,471,527 15,889 1.08% Texas CHIP, SFY 2007 $2,693,048 554,554 10,042 1.81% Total Diabetes-Related Services $445,460,035 5,501,223 273,736 4.98%

11. Estimated 2011 Diabetes-Related Services Texas Diabetes Rates TX Medicare Enrollees with Diabetes Reimbursement Paid 2006 Reimbursement Paid: $445,460,035 2006 : Enrollees with Diabetes 273,736 * 2011 Estimated Statistics Based on 2003 to 2006 Reimbursement Trends and Texas Projected Diabetes Cases; See Slides 3 & 4; *Source: CDC Behavioral Risk Factor Surveillance System, Statewide BRFSS Survey, 2008, for persons who are eighteen years of age and older, and include both Type 1 and Type 2 Diabetes. Persons with diabetes include those who report that they have been told by a doctor that they have diabetes. Estimated 2011 Reimbursement Payments: $507,401,000 Estimated 2011 Enrollees with Diabetes : 378,000 Year` Texas Increase 2003 8 2006 9.7 21% Year Texas Increase 2003 222,017 2006 273,736 23.3% Year Texas Increase 2003 $408,837,880 2006 $445,460,035 9%

15. *New Meter Allowed One every 3 Years **Estimated 2011 Medicaid Eligible Texans with Diabetes Potential Savings by Lowering Diabetes Supplies Allowed Amount through Preferred DME & Vender Contracting 50ct Test A4252 Lancets 100ct A4258 Meter E0607* Texas Medicaid Allowed Amount $30.74 $12.08 $50.00 Goal Cost per 50s; 100s, each $20.74 $8.08 $0.00 Goal Savings per box 50s; 100s, each $10.00 $4.00 $50.00 1 box per month 378,000 Enrollees** $3,780,000 $1,512,000 $126,000 Annual Total Estimated Annual Adjudications 4,536,000 4,536,000 1,512,000 10,584,000 Potential Annual Savings $45,360,000 $18,144,000 $126,000 $63,630,000