Medicare Payments for Durable Medical Equipment Are Higher Than Necessary

GAO reported on the probable fiscal impact of the failure of the Department of Health and Human Services (HHS) to implement a law aimed at reducing the cost to the Medicare program and its beneficiaries for the prolonged rentals of durable medical equipment.

HHS has yet to fully carry out the intent of legislation to reduce the cost of renting durable medical equipment under Medicare. The Medicare payments for durable medical equipment for calendar year 1979 were estimated at $125 million. At the time of the GAO review, HHS instructions required Medicare carriers to determine, for items with a purchase allowance of more than $60, whether purchase would cost less or be more practical than rental and, if so, to reimburse on a purchase basis. Items with a purchase allowance of $60 or less were always to be purchased. GAO can see no justification for not applying the regulation, except where equipment is purchased on a lease-purchase arrangement rather than with a lump-sum payment. Based on statistical samples at six carriers, GAO estimated that about $2 million in excess rental payments occurred during 1979. The excess rental payments averaged about 21 percent of total payments for durable medical equipment by these carriers. An estimated $275,000 would have been saved if all items costing $60 or less had been purchased on a lump-sum basis, and an estimated $463,000 would have been saved if items costing $60 or more were purchased when an analysis of the medical necessity forms showed that the expected length of need for the items exceeded their break-even points. GAO believes that it is doubtful that there will be any circumstances in which a lease-purchase arrangement will be more economical than a lump-sum purchase.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Michael Zimmerman Team: General Accounting Office: Human Resources Division Phone: (202) 275-6195