Military healthcare paying more than $400 for a $46 can of baby formula
JACKSONVILLE, Fla. - Parents know all too well how the cost of baby formula can weigh on a monthly budget. A single 14-oz. can of formula can cost anywhere from $15 to $20. It's worse for parents whose babies rely on hypoallergenic formula, which can often cost between $40 to $60 per can.
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Babies and toddlers with digestive conditions rely on hypoallergenic formulas, commonly made by brands like Neocate, Enfamil and Elecare. These meal replacement formulas are recommended or prescribed by doctors and are covered by insurance plans, including TRICARE, the health insurance provider for active and retired military members and their families.
Despite the prices, the government has been forking over $420 for each 14-oz. can and one military family is wondering why.
Military mother shocked by bill
On Neocate's website, a 14-oz. hypoallergenic can can be purchased for $46. Yet, one local military mom - who wished to remain anonymous to protect her military job - says her TRICARE plan has been paying over $420 for the same size of formula. She told First Coast News she made this discovery after looking at her insurance paperwork and noticing a $6,400 charge for 15 cans of Neocate formula for her special needs child.
The military mother questioned why federal money was being used to pay about ten times more for a product. Her shock, however, was not shared by TRICARE or Bioscrip, Neocate's manufacturing company.
First Coast News' On Your Side team reached out to TRICARE officials with the Department of Defense. A spokesperson said Neocate, along with other similar products, are the few items that doesn't have a set nationwide price. As a result, it creates a rate for each state using claims data.
In other words, instead of being priced by the can, the formula is priced by the calorie. The nutrient-heavy meal replacement formulas contain thousands of calories (often 1,600 calories to 2,000 calories). Florida's prevailing 'state rate' of 27 cents per calorie transforms the cost of a $46 can into a $432 can.
Both TRICARE and Bioscrip agree to this reimbursement rate, puzzling insured patients and patient advocates who call the inflated price financial waste.
Dependency on hypoallergenic formula
Lilly Witherspoon of Jacksonville has a 3-year-old son, Erin, who suffers from a rare digestive condition, Familial Liproprotein Lipase Deficiency. Like thousands of infants in the U.S., without hypoallergenic formula, Erin would constantly be in the hospital.
"We were just strictly breastfeeding so they stopped me from that because the condition that he has causes him to not be able to break down fat," Witherspoon said. "You have to be very accurate because too much [food] could cause a lot of problems and too little could cause many problems too."
Witherspoon isn't military, but she's shocked to learn the military's insurance is shouldering such high payments.
"The most I've been told per can for me to purchase was about sixty dollars," Witherspoon said. "But to hear [$420] is outrageous and scary because you wonder what if there's a lapse or problem with insurance, [a parent] has to pay out of pocket so it's a very worrisome situation."
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The anonymous military mother did not have to pay for the $6,400 case out of pocket, only a 20 percent portion through her cost sharing plan which is capped at $3,000. Yet, she says the high price tag meant she paid more, and sooner, than expected.
Reasonable, usual, and customary pricing
Harvey Matoren, the president of Claims Security of America in Jacksonville, which helps patients manage their medical bills and health insurance, says medical prices and charges are based on reasonable, usual, and customary charges.
"The average of what the community provider would charge for similar services, sometimes they're within those ranges and sometimes they're significantly out of those ranges," Matoren said. "What's really disturbing is when you have a patient who goes out of network and they are charged the complete charged amount, that's where patients get into trouble."
Matoren recommends patients examine their Explanation of Benefits insurance pages closely, even when the cost to patient is minimal.
"We've heard lately of excessive charges by manufacturers of drugs and astronomical increases in prices," he said. "Sometimes there's a method to the madness."
For example, Mylan rose its wholesale price for the EpiPen, commonly used for allergic reactions, by 400 percent last April. It jumped from about $56 to about $317.
Why is the government paying more?
TRICARE's reimbursement rates differ in each state, and currently no state prices the meal replacement formula products (procedure code B4161) under $200 dollars per can. In Tennessee, the reimbursement rate is $233.60 per can. In Georgia, the rate is $498 per can.
TRICARE officials made the following statement:
"While we cannot discuss any specific cases, TRICARE reimburses Neocate Junior Formula using Medicare's Durable Medical Equipment, Prosthetic, Orthotics and Supplies reimbursement rates. The DMEPOS fee schedule is the allowable amount. However, in the case of Neocate Junior with the Healthcare Common Procedure Coding System code of B4161, there is no set price. When there is no rate on the Medicare fee schedule, TRICARE contractors establish a state-wide prevailing rate. A prevailing rate is created using claims data, and in this instance the allowable amount TRICARE pays is the lesser of the established prevailing rate, billed rate or the negotiated rate."
Florida Senator Marco Rubio's spokesman, Matt Wolking told First Coast News, "Our office has been in contact with the Defense Health Agency regarding [this case] and we are seeking more information about why these charges to TRICARE are so high."
