Medicare

In fiscal year 1996, nearly 480,000 Medicare beneficiaries received supplemental oxygen at home at a cost of about $1.7 billion. GAO found that Medicare pays about 38 percent more for home oxygen supplies than the competitive marketplace rates paid by the Department of Veterans Affairs (VA). In some cases, Medicare obtains even fewer oxygen benefits despite paying higher prices. The Balanced Budget Act of 1997 includes provisions that should bring Medicare's reimbursement rates more in line with the competitive marketplace rates paid by VA. The act also requires developing service standards for home oxygen suppliers that serve Medicare patients, as well as monitoring patient access to home oxygen equipment. However, concerns have been raised that these rate reductions could reduce Medicare beneficiaries' access to portable units, which do not offer suppliers the attractive profit margins associated with lower-cost oxygen concentrators.

GAO noted that: (1) Medicare's fee schedule allowances for home oxygen exceeded GAO's adjusted estimate for the competitive marketplace rates paid by VA by almost 38 percent; (2) the rate reductions mandated by the Balanced Budget Act of 1997 will bring Medicare's fee schedule more into line with the competitive marketplace costs for home oxygen; (3) concerns have been raised that these reductions could reduce Medicare beneficiaries' access to portable units; (4) under Medicare's modality-neutral payment system, home-based liquid oxygen systems, which patients can use to refill portable units, do not offer suppliers the attractive profit margins associated with lower-cost oxygen concentrators; (5) lightweight, less cumbersome portable systems, which may increase patient mobility, are more expensive than traditional portable gas cylinders; (6) GAO's analysis shows that VA patients were receiving more portable units and refills than Medicare patients were, even though VA's payment rate, adjusted for comparability, was lower than Medicare's; (7) the upcoming reductions in Medicare allowances may lead some suppliers to provide Medicare patients with the least costly systems available, regardless of their patients' needs; (8) the Department of Health and Human Services (HHS) could use its authority under the recently enacted legislation to establish separate reimbursement rates for oxygen concentrators, liquid systems, regular portable units, and lightweight portable units, as long as the impact on overall Medicare costs is budget neutral; (9) the evolution in technology and costs of oxygen delivery systems--and the clinical indications for initiating and terminating the use of more expensive, lightweight portable units--warrant further examination by HHS and the Health Care Financing Administration (HCFA) before deciding whether Medicare's reimbursement system should be restructured; (10) HCFA has not established standards to ensure that home oxygen suppliers provide Medicare patients even basic support services; (11) oxygen suppliers who serve Medicare patients need only comply with basic registration and business requirements associated with obtaining a Medicare supplier number; (12) in contrast, VA encourages its medical centers to contract with suppliers who are accredited by the Joint Commission on Accreditation of Healthcare Organizations or comply with its standards; (13) VA patients typically received more frequent service visits than Medicare patients; and (14) the Balanced Budget Act requires HHS to establish service standards for Medicare home oxygen suppliers.

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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