Medicare

The fee schedule payment system for durable medical equipment sold or rented to Medicare patients--everything from wheelchairs to oxygen tents--has resulted in both Medicare and its beneficiaries paying more than they would have under the former reasonable charge system. For the high-volume items GAO reviewed, Medicare costs increased 17 percent in 1989. The recent legislative changes to the fee schedule payment system will return Medicare payments, in 1989 dollars, to the level that would have been incurred under the former reasonable charge system. The wide payment variations across geographic areas that existed under both the reasonable charge method and the fee schedules will be substantially reduced under the recent legislative changes.

GAO found that: (1) 1987 fee schedules increased Medicare program costs and beneficiary liability, with the greatest increases related to rental items purchased and rented under the fee schedule; and (2) 1990 changes in the fee schedules will make payment rates more uniform, and will reduce program costs to levels equivalent to those prior to implementation of the fee schedule.