Medicare

Before the Balanced Budget Act of 1997, Medicare's payment rates for home oxygen exceeded those of the Department of Veterans Affairs by almost 38 percent. The act reduced Medicare's rates by 25 percent effective January 1, 1998, and GAO evaluated changes in Medicare's patients' access to home oxygen since the payment reduction. Preliminary indications are that access remained substantially unchanged. The number of Medicare beneficiaries using home oxygen equipment increased, and the proportion of those using the more costly stationary liquid oxygen systems decreased. Even Medicare beneficiaries who were expensive or difficult to serve were able to get the appropriate systems for their needs, and suppliers accepted the Medicare allowance as full payment for more than 99 percent of claims. Most suppliers increased operating efficiencies to mitigate the effect of the payment reduction. However, subtle access issues may not be readily apparent, and problems could emerge as more and better information becomes available. Beyond contracting with a peer review organization for an evaluation of access to and the quality of home oxygen equipment, the Health Care Financing Administration (HCFA) has not established an ongoing method to monitor the use of this benefit and gather the information essential to assessing the payment system. It has also not developed service standards for home oxygen suppliers, as required by the act, to allow them to decide themselves what services they will provide.

GAO noted that: (1) preliminary indications are that access to home oxygen equipment remains substantially unchanged, despite the 25-percent reduction in Medicare payment rates that took effect in January 1998; (2) the number of Medicare beneficiaries using home oxygen equipment has been increasing steadily since 1996, and this trend appears to have continued in 1998; (3) while Medicare claims for the first 6 months of 1998 showed a decrease in the proportion of Medicare patients using the more costly stationary liquid oxygen systems, this decline was consistent with the trend since 1995; (4) hospital discharge planners and suppliers GAO talked with said that even Medicare beneficiaries who are expensive or difficult to serve are able to get the appropriate systems for their needs; (5) further, suppliers accepted the Medicare allowance as full payment for over 99 percent of the Medicare home oxygen claims filed for the first half of 1998; (6) although these indicators do not reveal access problems caused by the payment reductions, issues such as sufficiency of portable tank refills and equipment maintenance could still arise; (7) HCFA has responded to only one BBA requirement; (8) as required by the BBA, HCFA has contracted with a peer review organization (PRO) for an evaluation of access to, and quality of, home oxygen equipment; (9) results from this evaluation are not expected before 2000; (10) meanwhile, HCFA has not implemented an interim process to monitor changes in access for Medicare beneficiaries--a process that could alert the agency to problems as they arise; (11) although not required by the BBA, such monitoring is important because of the life-sustaining nature of the home oxygen benefit; (12) until HCFA gathers more in-depth information on access and the impact of payment reductions, HCFA cannot assess the need to restructure the modality-neutral payment; (13) HCFA has not yet implemented provisions of the BBA that require service standards for Medicare home oxygen suppliers to be established as soon as practicable; and (14) service standards would define what Medicare is paying for in the home oxygen benefit and what beneficiaries should expect from 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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