Roosevelt Institute | Cornell University

The Expense of Diabetes The Case for Bundled Payments for Treatment of Diabetes Mellitus Type I

By Jack ViehwegPublished January 14, 2022

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Diabetes Mellitus Type I is an expensive disease that is increasing in prevalence in the United States. Many patients receive incomplete care due to cost and/or insurance coverage difficulties. Per the lead of other countries, bundled payments for the treatment of this disease could be a way to better tailor diabetic care to each patient, while also reducing healthcare utilization and improving coordination of care.

Imagine having to ration life-saving medication due to cost, or having to choose between affording medication or doctor’s appointments. For 1 in 4 people with type I diabetes in the United States, this rationing is their reality. Currently, about 1.6 million Americans live with Type I Diabetes, and this number is steadily increasing. It is estimated that, by 2050, five million people in the US will be actively diagnosed with Type I Diabetes. With this chronic condition becoming more prevalent, measures need to be taken to improve how diabetic care is coordinated and financed in the United States.

A diagnosis of Type I Diabetes Mellitus means a lifetime of endocrinology appointments, diet and weight tracking, blood glucose monitoring, and insulin usage, among other inconveniences. Unfortunately, many Americans living with this condition receive uncoordinated and incomplete care, due to varying degrees of insurance coverage and/or access to specialists throughout the country. One of the main barriers to effective treatment and disease management is the cost of insulin and continuous glucose monitors (CGMs). As of 2016, the average cost of insulin per year for a type I diabetic patient was $5,705. Additionally, the cost of a continuous glucose monitor ranges from $2500 to $6000 per year, with only some insurance carriers covering these costs.

While the expense of supplies for each diabetic patient can vary greatly, when type I diabetes is under control, a patient’s use of healthcare, including tests and medications, remains fairly low. Given this information, it would make sense for diabetes treatment (supplies included) to be made a bundled payment. Bundled payments have been used in the United States since the 1980s, when the Texas Heart Institute began charging flat fees for cardiovascular surgeries. Since then, bundled payments have become more common, with approximately one-fifth of US healthcare reimbursements being bundled in 2012.

The benefits of bundled payments are plentiful. Bundled payments encourage efficiency and cross-specialty collaboration while disincentivizing unnecessary high-cost care. Moreover, care providers have more agency over how to delegate funds to tailor care for each patient: if a provider has multiple patients with varying needs, then they have the agency to allocate funds as needed to provide the highest quality care for all of their patients. However, bundled payments only work if the episode of care can be defined. One potential option would be to have a patient’s main diabetic care provider––typically a primary care doctor or an endocrinologist––designate the patient as either newly diabetic, controlled diabetic, or uncontrolled diabetic at the end of each year. By creating these designations, insurers could then reimburse providers at an agreed-upon bundled rate, in order to provide care to the diabetic patient for the next year. This policy would incentivize care providers to keep their patients’ diabetes controlled and their healthcare utilization low, while also allowing providers to get necessary supplies––including CGMs and insulin––to their patients, without petitioning for insurance reimbursement. 

An example of this type of bundled payment being implemented occurred in 2007, when the Netherlands adopted a bundled payment system that covers care for medical conditions, rather than individual procedures or treatment episodes; these conditions were Type II Diabetes, COPD, and vascular-risk management. In 2007, a Dutch national Health Care Standard for Type II Diabetes codified the services covered in a diabetes-care bundle. This implementation led to the creation of care groups, i.e., teams of care providers for specific conditions. However, little statistical analysis has been done to determine whether bundled payments significantly affected health spending or objective health outcomes. One study found that primary care costs for diabetes began to decline seven years after the implementation of bundled payments; however, the study could not definitively conclude whether or not the savings were attributed to the bundled payments. While there is limited data supporting financial savings due to bundled payments for chronic disease management, data on bundled payments for acute conditions demonstrates that bundled payment improves the quality of care while reducing cost. 

While the future for diabetes treatment remains uncertain, bundled payments may be a step towards more equitable and value-based care, which could be a starting point for better disease management and care coordination––not only for Diabetes Mellitus Type I, but also for additional chronic diseases.