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Medicare: Need to Overhaul Costly Payment System for Medical Equipment and Supplies

HEHS-98-102 Published: May 12, 1998. Publicly Released: May 15, 1998.
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Highlights

Pursuant to a congressional request, GAO reviewed Medicare's payments for commonly purchased, off-the-shelf durable medical equipment (DME), focusing on the need to: (1) better identify products billed to Medicare; and (2) bring Medicare fees more in line with current marketplace prices.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
In order to help ensure that Medicare fees for DME are reasonable, Congress may wish to consider enacting legislation directing the Secretary of Health and Human Services to reimburse providers of medical equipment, supplies, and devices at the lower of the Medicare fee schedule allowance or the lowest payment suppliers agreed to accept from other payers.
Closed – Implemented
In the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), CMS was required to begin competitive acquisition of--also called competitive bidding for--durable medical equipment, off-the-shelf orthotics, and supplies in 2007. Through competitive bidding, suppliers who wish to serve Medicare beneficiaries will proffer fees that they would accept and the Centers for Medicare & Medicaid Services (CMS) will use that information to set payment amounts and choose suppliers. Competitive bidding addresses the essence of GAO's recommendation.
In order to help ensure that Medicare fees for DME are reasonable, Congress may wish to consider enacting legislation directing the Secretary of Health and Human Services to establish a separate fee schedule to reimburse nursing homes for the medical equipment, supplies, and devices provided to their patients.
Closed – Implemented
In the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), CMS was required to begin competitive acquisition of--also called competitive bidding for--durable medical equipment, off-the-shelf orthotics, and supplies in 2007. Through competitive bidding, suppliers who wish to serve Medicare beneficiaries will proffer fees that they would accept and the Centers for Medicare & Medicaid Services (CMS) will use that information to set payment amounts and choose suppliers. Competitive bidding addresses the essence of GAO's recommendation.

Recommendations for Executive Action

Agency Affected Recommendation Status
Health Care Financing Administration In order for HCFA to gather information needed to adjust Medicare fees for DME, the Administrator, HCFA, should require suppliers to identify the specific medical equipment, supplies, and devices they bill to Medicare by including universal product numbers on their Medicare claims.
Closed – Not Implemented
CMS did not report any progress on this recommendation.
Health Care Financing Administration In order for HCFA to gather information needed to adjust Medicare fees for DME, the Administrator, HCFA, should ensure that HCFA's contractors systematically gather and analyze market prices for medical equipment, supplies, and off-the-shelf orthotic devices billed to Medicare by using commercial pricing databases and considering competitive prices paid by the Department of Veterans Affairs, the Department of Defense, and other large payers.
Closed – Implemented
HCFA has met with commercial database companies and determined that their databases will not provide relevant pricing data in making inherent reasonableness determinations. However, it is exploring the possibility of identifying these data through other means.
Health Care Financing Administration The Administrator, HCFA, should use the authority provided by the BBA to adjust Medicare fee schedule allowances, setting a priority on items that account for the highest Medicare expenditures.
Closed – Implemented
In the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), CMS was required to begin competitive acquisition of--also called competitive bidding for--durable medical equipment, off-the-shelf orthotics, and supplies in 2007. Through competitive bidding, suppliers who wish to serve Medicare beneficiaries will proffer fees that they would accept and the Centers for Medicare & Medicaid Services (CMS) will use that information to set payment amounts and choose suppliers. Competitive bidding is to be phased in for the items with highest cost and billing volume. Furthermore, CMS will be able to use information from the competitive bidding process to adjust fees for the items bid in geographic areas not included in the bidding. This new authority supplements the authority given in the BBA. CMS has issued regulations to allow it to begin competitive bidding within a year.

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Topics

Billing proceduresClaims processingHealth care programsHealth insurance cost controlMedical equipmentMedical expense claimsMedical suppliesMedicareOverpaymentsPrices and pricing