Economic Realities Associated With Diabetes Care: Opportunities to Expand Delivery of Physical Therapist Services to a Vulnerable Population

Rhea Cohn


Each year, more Americans are newly diagnosed with type 2 diabetes mellitus. The costs for managing this disease are high, and the cascade of problems associated with poorly controlled diabetes is significant. At the same time, the number of uninsured or underinsured Americans is growing. This article describes current trends in health insurance availability and coverage for the growing number of people with diabetes and addresses the direct costs associated with treating this disease. The economic burden of health care for people with diabetes continues to escalate. Payers and employers are interested in decreasing their direct and indirect costs, improving profit margins, decreasing employee absenteeism, and increasing employee productivity. For physical therapists to recognize existing or new opportunities to participate in the management of this costly disease, it is critical that they understand how employees, payers, and employers are responding to the changing market forces affecting health insurance.

The American Diabetes Association (ADA) estimates that diabetes affects more than 20 million Americans and costs employers more than $132 billion annually in direct and indirect costs, including hospitalization, emergency department visits, disability insurance costs, absenteeism, and lost productivity.1 A recently released report, “State of Diabetes Complications in America,” noted that people with diabetes incur medical expenditures approximately 3 times higher than those who do not have the disease.2 A recent study3 noted that as rates of diabetes have risen, so have rates of related cardiovascular diseases. It is estimated that 54 million adults aged 20 years and older have prediabetes, defined as blood sugar levels that are elevated but are not high enough to be classified as diabetes. Many of those adults will develop diabetes.4

In addition to the existing incidence data, there is a growing body of evidence demonstrating that with the increase in the prevalence of obesity in young people, there is and will continue to be an increase in the prevalence of type 2 diabetes mellitus in that cohort.5 Most cases of diabetes in youths younger than 10 years of age are type 1 diabetes mellitus. Although still relatively infrequent in youth, type 2 diabetes mellitus in young people is seen at the highest rates in adolescent, minority populations.

For a person with type 2 diabetes and its complications, total yearly expenditures are approximately $10,000.2 It is estimated that direct, out-of-pocket expenses not reimbursed by insurance (eg, co-payments and deductibles) reach nearly $1,600. Medical care is needed to monitor blood pressure, blood glucose, cholesterol levels, kidney function, and vision and for foot and ankle assessments, and administration of vaccines. Approximately 58% of patients with type 2 diabetes have one or more complications from the disease, causing an increased demand for medical services. In 2005, approximately 40% of adults with diabetes reported a family income of less than $35,000, making the burden of financial obligations for the care of diabetes and related diseases significant and daunting.

In future years, an increasing portion of health care dollars will be spent on diabetes care. The purposes of this article are: (1) to increase physical therapists’ awareness that their patients may not have adequate financial resources to manage the disease and that this situation will affect their medical status and their ability to participate in a recommended program of physical therapy and (2) to emphasize opportunities for physical therapists to participate with other health care providers in the proactive management of this disease.

Health Insurance Availability for People With Diabetes

People with diabetes, which may be considered a preexisting condition, may have difficulty obtaining health insurance that is both affordable and adequate. The American Diabetes Association (ADA) report “Falling Through the Cracks: Stories of How Health Insurance Can Fail People with Diabetes” illustrates the problems that people with diabetes experience with limited health insurance coverage and high cost of care.6 Increasingly more common employer-sponsored or individually purchased health insurance models with higher co-payments and deductibles provide disincentives for patients to access care. It is not uncommon for patients who are underinsured or not insured to wait until a crisis develops to access medical care.

The reluctance of an employee to change jobs for fear of losing employer-sponsored health insurance coverage is an unfortunate consequence for people with diabetes. This situation, known as “job-lock,” is very real for people who require long-term care and are dependent on employer-sponsored health insurance. Problems can arise because of health insurance transitions such as a relocation, a change in marital status, or a job change. Any one of these transitions can cause a change in health insurance coverage, a delay in obtaining new coverage, or a loss of coverage because diabetes may be considered a preexisting condition.

Alternatives do exist for people who lose employer-sponsored health insurance coverage, but the options are not ideal. Individual coverage may be unavailable because diabetes may be considered a preexisting condition. If individual health insurance policies are available, they are often expensive, and premium savings for these policies can be realized only if coverage for prescription drugs is limited and the deductible is raised. Such limitations would cause an obvious hardship for people with diabetes. The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) allows eligible people to fully purchase their former employer's health insurance for 18 to 36 months after termination of employment. This is a temporary solution to the lack of health insurance, and not all people who lose their employer-sponsored coverage are eligible for COBRA. The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that requires nongroup coverage to be offered to eligible people who have exhausted COBRA coverage. Unfortunately, insurers have no limitations on what they can charge for HIPAA coverage or how the benefits are designed. This limited regulation makes HIPAA coverage unattractive. High-risk pools are another alternative for people without health insurance. The ADA report notes that 32 states have established high-risk pool programs for people who have been denied coverage by private insurers. Challenges with high-risk pool programs include preexisting condition exclusions and restricted eligibility rules.

The ADA report highlights the public policy implications of decreased access to affordable health insurance for people with diabetes. First, losing coverage is easy, but regaining coverage is difficult. People with diabetes experience coverage limitations, premium surcharges, and preexisting condition exclusions. Second, safe harbors, such as COBRA, HIPAA, and state mandates, do not guarantee affordable and adequate coverage. The report suggests that existing subsidies could be expanded to encourage coverage and limit the economic burden for people with limited or no health insurance. Insurance must not just be about covering loss but also about maintaining health.

Medicaid and Medicare are public programs that may provide coverage for certain people. Effective January 2005, Medicare provides coverage for screening tests for people at risk for diabetes or those with prediabetes. Medicare coverage includes self-management training services for eligible beneficiaries. There is limited coverage for supplies, including blood glucose self-testing equipment and accessories, therapeutic shoes, insulin pumps, and insulin. Other covered services include foot care, hemoglobin A1c tests, and glaucoma screening, although patients are still responsible for 20% of the costs. Coverage for syringes, insulin pens, alcohol swabs, orthopedic shoes, and weight-loss programs may be excluded.7 If a person with diabetes is accepted for Medicare disability coverage, then he or she must wait 24 months before coverage begins. Medicaid coverage is state specific. Because states have an increasing Medicaid obligation, they have begun to restrict benefits for many conditions.

As of January 2008, 46 states and the District of Columbia have laws that require health insurance coverage for the treatment of diabetes.8 Most states require coverage of direct treatment, equipment, and supplies.

The Medical Expenditure Panel Survey investigated diabetes management in the US population in 2003. Fewer than half of the respondents reported having had the 3 tests recommended for people with diabetes: hemoglobin A1c, eye examination with dilation, and foot examination. Adults between 18 and 64 years of age with private insurance were much more likely to have received all 3 tests than people with public insurance or those who were uninsured.9 These data suggest that adults with diabetes and with insurance are more likely to access services that positively affect the management of the disease.

Physical therapists are frequently involved in providing care to patients with complications from diabetes, which include strokes, wounds, amputations, neuropathies, hypertension, and heart disease. Employers and payers are aware of the huge costs associated with the complications from diabetes and are aware of the potential for financial savings realized from proactive management of the disease. Physical therapists have an opportunity to collaborate with these stakeholders and participate in programs that have the potential to positively affect the health of patients as well as decrease the economic burden of the disease. The challenge is to identify collaborative relationships with employers and payers. First, however, it is important to consider the drivers affecting the decision making of the parties purchasing, controlling, and accessing health care services.

Employer Perspectives in the Health Care Paradigm

Employers play a large role in the area of health insurance. Most working Americans obtain health insurance for themselves and their families through employer-sponsored health insurance programs. Nonetheless, the Kaiser Family Foundation report “Changes in Employees’ Health Insurance Coverage, 2001–2005”10 notes that employer-sponsored coverage rates have been declining. In 2000, the rate was 66%, whereas in 2004, the rate was 61%. One reason for the decline is that more employed Americans are opting out of employer-sponsored health insurance.10 Many employees who opt out consider the premium costs to be too high; consequently, they are willing to risk any financial burden that might be incurred without insurance.

Small-group employers, or those with fewer than 25 employees, have significantly less leverage than large-group employers when purchasing health insurance. As a result, it is increasingly common for small-group employers to offer little or no health insurance. People working for small-group employers, nonmarried employees who do not have the potential to participate in a spouse's employer-sponsored health insurance, low-income employees, and young employees (19–24 years of age) have been affected the most by employers limiting or lacking health insurance as a benefit.

Employers have had to contend with increases in premium costs for many years. Although the rate of increase has slowed, the increases have been unrelenting. The Kaiser Family Foundation “Employer Health Benefits 2007 Annual Survey” noted that the average annual premiums across all plan types are $12,106 for family coverage and $4,479 for single coverage.11 The average percentages of premiums paid by an employee are 16% for single coverage and 28% for family coverage.11 Employers are aware that medical costs for employees or their family members with diabetes are significantly higher than those for employees without diabetes or other chronic conditions and therefore have every reason to consider initiatives that will minimize their costs resulting from employees with poorly managed diabetes.12

In response to the increases in health insurance premiums over many years, employers have used a variety of strategies to contain their costs. One strategy is to choose health insurance models that shift a higher percentage of costs to employees. One of the newer models is called the high-deductible health plan (HDHP). In this model, the employee or family member has to meet a large deductible before the insurance coverage becomes available. The average annual deductible for single coverage in these plans is $1,729.13 The high deductible forces the employee or family member to decide whether a service has enough value to warrant the out-of-pocket expense. Not all services may count toward meeting the deductible obligation.

Patients with limited financial resources are particularly sensitive to changes in co-payments and deductibles. A RAND Corporation study noted that the use of antidiabetes medications decreased by approximately one quarter in response to a 100% increase in co-payments and that emergency department visits increased.14 Often, if an employee or a family member chooses to forgo certain recommended treatments, including but not limited to preventive screening or medication usage, then the ultimate costs for the employee or family member as well as the health care system may be higher than if services had been accessed when recommended. Ultimately, the employer has to absorb the costs of higher premiums each year, shift more of the premium costs to employees, or decrease the amount of insurance benefit offered. The employer also must consider the indirect costs related to absenteeism and decreased productivity of the worker whose diabetes is poorly controlled because of the financial constraints of premium sharing, co-payments, and deductibles.

Because HDHPs may provide incentives for an employee or a family member to access fewer services, a few large-group employers have developed an HDHP benefit package that adds coverage for prevention services and excludes these services from the deductible requirements. This option adds a financial incentive to access prevention services and has the potential to reduce the indirect costs associated with lost productivity at work, sick days, and time off for illness of an employee or a family member.

It has been suggested that if consumers had increased access to evidence-based information, then they would make wise decisions pertaining to the use of health care services.15 These consumer-driven health plan models assume that consumers will access the available information, understand the facts, and make logical decisions regarding their choice of health care providers and use of services. These models have not been available for a sufficient period of time to validate these assumptions. There is concern that many consumers of health care services, particularly those with multiple chronic conditions, may be ill equipped to understand the evidence being presented or may not access the information to make health care decisions that are optimal or realistic. In some cases, consumers may not have easy access to the information that will help them make these decisions. Employers may need to make the data easily available and understandable for their employees to realize potential savings.

Large-group employers are beginning to realize the economic benefits of programs, other than health insurance, that help their employees with the management of chronic diseases, including diabetes. These programs have the potential to reduce direct medical expenses, employee sickness, and absenteeism. They also serve as an excellent complement to employer-sponsored, high-deductible health insurance. An example of an effective program is an on-site weight management program available to all employees.

The National Business Group on Health (NBGH), using available evidence from the US Preventive Services Task Force, the Centers for Disease Control and Prevention, and other organizations, provides tools that assist large-group employers with the design of health insurance benefit packages. The goals are to promote the health of employees and family members and to control health care costs by offering clinical preventive services.16 The NBGH offers its members specific guidelines for the management of diabetes.17 These guidelines include developing a supportive environment; promoting good diabetes control; encouraging the adoption of healthy lifestyles through proper diet, exercise, and treatment; coordinating diabetes control efforts within the organization; and providing the best possible medical care for employees by offering health insurance plans that have proactive diabetes initiatives. The NBGH believes that such initiatives, which educate employees about diabetes, will benefit the employer in terms of both direct medical expenses and decreased absenteeism, on-the-job injuries, job turnover, and unnecessary health care costs.

Many large-group employers are beginning to rethink the cost-shifting strategy that has been so popular in the last 10 years. Rather than expecting employees to pay for more of the costs of their care, employers such as Marriott International, Proctor and Gamble, the University of Michigan, and Eastman Chemical have reduced or eliminated co-payments for drugs for certain chronic conditions, such as heart disease. Pitney Bowes gives away medicines to employees with diabetes and asthma.18 These companies are able to track their health care costs and now understand that reducing or eliminating co-payments has increased patient compliance and reduced hospital and emergency department admissions.

The Ashville Project, started approximately 10 years ago, is an example of an innovative diabetes management program developed by multiple stakeholders.19 Employers and providers collaborated to offer a disease management program with financial incentives for patients. Employers could elect to waive co-payments and deductibles for the costs of prescription drugs and glucose monitoring devices in exchange for a commitment from an employee with diabetes to receive periodic counseling in diabetes management from specially trained pharmacists. The pharmacists are paid directly by the employers. Although there was an increase in direct costs for the employers during the first year, the program realized savings almost immediately through a reduction in costs stemming from complications of uncontrolled diabetes. If the participants failed to meet their obligation of attendance at counseling sessions and other appointments, their co-payments were reinstated. In the first 5 years after implementation of the program, it is estimated that the savings have approached $3,000 per patient.

This model has been adopted by other employers. In just 3 years, VF Corporation, an apparel manufacturer in North Carolina, saved approximately $5,115 per participant.20 Modeled after the Asheville Project, the Diabetes Ten City Challenge was developed by the American Pharmacists Association Foundation in conjunction with employers and community leaders in 10 locations to promote cost savings and improve employee health and quality of life.21 This project resulted in a savings of $918 per employee in total health care costs for the initial year, with even greater savings in subsequent years, as well as a 50% reduction in absenteeism, fewer workers’ compensation claims, and employee out-of-pocket savings.21

Role of Employees

Employees may choose not to participate in employer-sponsored health insurance for many reasons. First, an employee may obtain coverage through a spouse's employer. Second, an employee may decline access to employer-sponsored health insurance because the premium contribution is considered too high and the employee would rather have an increase in gross weekly earnings. The decision to refuse employer-sponsored health insurance places employees and family members at risk if an unforeseen medical event occurs or someone is diagnosed with a chronic condition.

Deductibles can be a financial burden for employees. An employee has an incentive to be prudent in the use of services covered by the deductible. The employee or family member who is the patient needs to assess the value of the health care service that will be purchased by the deductible. If the service is perceived to be optional, not urgent, or not of high value, then the employee or family member will most likely not access the service.

Besides high deductibles, higher co-payments are increasingly common. This situation should be of particular concern to physical therapists. Because patients typically see a physical therapist multiple times during an episode, the financial burden of co-payments may be a deterrent to accessing care. The financial burden for patients with diabetes is significant, and without outside incentives, they may not access appropriate care—as with physical therapy—or be compliant with care recommendations.

The valuing of health care by consumers poses a critical challenge for physical therapists. Does a typical consumer of health care understand the value of physical therapy, and will the consumer pay for that service with money that otherwise could be kept for future use? Will patients access physical therapy services after the initial treatment or decide that they can manage without the recommended treatment? It is critical that by the completion of the first visit, a physical therapist has convinced the patient, the caregiver, or both that the services that the therapist provides have immediate and future worth. It is important to establish the desired outcomes of care with the patient, the caregiver, or both and to estimate the projected time needed to accomplish the goals. The continued value of physical therapy must be demonstrated throughout the episode of care; otherwise, the patient may decide that the costs of care relative to the services provided are too high.

Payers’ Response

As previously mentioned, payers have historically had limited interest in payments for proactive care of chronic conditions. Although they have supported certain prevention and screening services, such as vaccinations, mammograms, and Pap smears, other services that are thought to promote a higher level of health have not typically been included in their health insurance benefit packages. Large-group employers are driving payers to make changes in this area. There are data suggesting that approximately 10% of patients account for approximately 70% of the health care dollars used.22 Because of this statistic, payers as well as employers are increasingly interested in managing the high costs of chronic conditions. Diabetes presents a huge financial burden for payers and will continue to do so in years to come.

The Diabetes Prevention Program Research Group reported that weight loss and moderate physical activity can delay or prevent the development of diabetes by 58% in high-risk patients.23 The same group reported that from a single-payer perspective, these interventions (weight loss and physical activity) cost $1,124 per quality-adjusted life-year (QALY) gained. This statistic suggests that the interventions physical therapists could provide to this population, in association with lifestyle changes, could be offered at a reasonable cost. Ackermann et al24 suggested that there is an opportunity for private payers and Medicare to collaborate in cost sharing of such programs for adults younger than 65 years of age so that the costs for the Medicare program of diabetes management for adults older than 65 years of age could be reduced.

Diabetes and Health Insurance: Implications for Physical Therapists

It is critical that physical therapists understand the challenges associated with health insurance coverage for people with diabetes. It should never be assumed that a person with diabetes has adequate coverage, even if he or she has health insurance. In fact, if physical therapists do not understand the economic burden associated with diabetes management for patients with limited or no insurance, they may underestimate the ability of the patients to fully participate in a recommended program of physical therapy, either for financial reasons or because medical management of the disease is inadequate. Although the professional recommendation of a therapist may be for the patient to attend outpatient therapy 3 times per week, it may be financially impossible for the patient to be compliant because of the co-payment, the deductible, other financial burdens imposed by the disease, or all of these factors. It is highly recommended that whenever a physical therapist identifies a patient with a history of diabetes, conversations with the patient include a discussion about health insurance and how it will affect compliance with the recommendation for physical therapy. Having that conversation with the patient will increase the perceived value of the service and the likelihood that the patient will develop confidence in the physical therapist as a professional.

Besides being observers of the traditional medical management of diabetes, physical therapists have an opportunity to identify and promote their expertise and commitment to the proactive care of people with diabetes. Promotion efforts can be targeted to employers or payers, depending on the model of coverage and the size of the employer. There is ample evidence to suggest that prevention or better control of diabetes can occur through lifestyle changes such as exercise and weight control. Physical therapists must recognize and pursue this opportunity. The positive effects of exercise in relation to diabetes management are known. Sigal et al25 noted that improvements in glycemic control were most effective when aerobic training and resistance training were combined rather than used separately. Other stakeholders must be educated regarding the relevance of physical therapists’ abundant training in medical conditions and skills in exercise prescription to the development of customized exercise programs. For example, advocacy efforts directed toward employers are needed to ensure that these services are part of their health insurance benefit packages and that there is little to no financial exposure for employees to access these services.

Physical therapists have an opportunity to partner with employers in their community as well as other local resources to facilitate diabetes management. First, physical therapists could offer direct contracting services to employers. These services could include on-site education programs as well as exercise classes specifically geared to promoting glycemic control, helping patients maintain or lose weight, improving cardiovascular status, and promoting foot examinations. Second, human resource directors could be given information pertaining to how physical therapists can help with diabetes management. Employers should be encouraged to design benefit language for their health insurance policies that provides incentives for employees, family members, or both groups to access these services. Such a benefit could be designed as a program with little or no co-payment or one that is not part of the deductible. Employers could offer such a benefit as an on-site or off-site benefit. Third, employers, particularly large-group employers, need to be educated about the significant cost savings that can be realized through employee participation in exercise programs for people with diabetes. Physical therapists could offer to participate in a pilot program to investigate the total costs of medical services related to diabetes care and care of complications when physical therapy services are used versus when they are not. Such programs have the potential to decrease employee absenteeism, improve productivity, and decrease direct and indirect costs for employers.

Physical therapists have an opportunity to collaborate with insurance companies in developing or expanding disease management programs for enrollees with diabetes. As part of the medical management team, physical therapists should be considered the experts in exercise who can affect weight control efforts. Working in conjunction with endocrinologists, dietitians, and patients, physical therapists should be consulted at regular time intervals to assess a patient's current exercise program and make any necessary revisions in the home program. Again, patients should be given incentives to participate.

Medicare's Physician Quality Reporting Initiative (PQRI) program for 2008 includes 2 quality measures pertaining to care of the foot and ankle in people with diabetes.26 One measure specifically addresses a neurological examination of the foot; the second measure addresses the assessment of footwear and recommendations for appropriate footwear.26 Physical therapists have the ability to report these quality measures for a bonus payment under the PQRI program. These assessments and recommendations should be part of an evaluation or reevaluation performed for any patient with a history of diabetes. The added value of these assessments, which are well supported in the literature, could be marketed to employers as part of direct contracting programs designed for employees with diabetes.

Finally, physical therapists need to promote themselves to other medical professionals with regard to the benefit of their participation in diabetes management programs. Patients with diabetes are usually seen by multiple professionals, including primary care physicians, endocrinologists, cardiologists, nutritionists or dietitians, and podiatrists. All of these professionals could be considered sources of referrals.

The primary care community, including primary care physicians, pediatricians, osteopaths, and internal medicine physicians, developed the “Joint Principles of the Patient-Centered Medical Home.”27 This model is intended to promote the benefit of coordinated medical management for patients with chronic conditions by a primary care physician or pediatrician. Physical therapists have an opportunity to promote their services to the primary care community, which has embraced the “medical home” model. For an additional perspective for how physical therapists might help in population-based policy approaches, see the article by Deshpande et al28 in this issue.


The financial burden of diabetes for patients, employers, and insurers is high. Each stakeholder has an interest in decreasing the costs of diabetes care and reducing the negative impact of the disease on productivity and employee absenteeism. Unfortunately, because of restrictions and limitations in current health insurance access and coverage, many patients with diabetes have limited or no coverage. This article discussed the challenges to patients with diabetes and their physical therapists. Physical therapists need to recognize their potential role in the current marketplace and take advantage of new opportunities for participation in the medical management of chronic conditions such as diabetes. There is every reason to believe that the incidence of diabetes will continue to grow; as a result, an increasing number of patients seen by physical therapists will have the disease. Vigilant monitoring of trends in insurance and employer-sponsored health insurance benefits will be critical to the business strategies of providers at all levels of care.


  • The author acknowledges Marilyn Fenichel and Andrew Guccione, PT, DPT, PhD, FAPTA, CAE, for consultation (including review of manuscript before submission).

  • Received December 31, 2007.
  • Accepted June 9, 2008.


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