Medicare

In fiscal year 1994 alone, Medicare was billed more than $6.8 billion for medical supplies. Congressional hearings and government studies have shown that Medicare has been extremely vulnerable to fraud and abuse in its payments for medial supplies, especially surgical dressings. In one case discussed in congressional testimony in 1994, Medicare paid more than $15,000 in claims for a month's supply of surgical dressings for a single patient, apparently without reviewing the reasonableness of the claims before payments. Until recently, medical suppliers had considerable freedom in choosing the Medicare contractors that would process and pay their claims. Some exploited this freedom by "shopping" for contractors with the weakest controls and highest payment rates. This report discusses the (1) circumstances allowing payment for unusually high surgical dressing claims and (2) adequacy of Medicare's internal controls to prevent paying such claims.

GAO found that: (1) although the Health Care Financing Administration (HCFA) has eliminated medical suppliers' ability to select contractors with the highest payment rates, unwarranted expenditures still persist; (2) reasons for the unwarranted expenditures include inadequate systematic payment controls and noncompetitive payment rates for surgical dressings; (3) many Medicare contractors lack itemized bills, fail to automatically review high-dollar claims for newly covered surgical dressings, and lack a systematic method for detecting duplicate bills submitted to different types of Medicare carriers; (4) Medicare payment rates for new surgical dressings and other medical supplies are considerably higher than wholesale and retail prices; (5) HCFA could curtail these overpayments by establishing procedures to require itemized claims, preventing duplicate payments to Medicare suppliers, and identifying high-dollar, high-volume claims that should be reviewed before payment; (6) the initiative will provide comprehensive national payment data that will allow HCFA and its contractors to detect inappropriate billing and overutilization; and (7) HCFA needs legislative authority to set competitive payment rates that are favorable for high-volume purchasers.

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.

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