Medicare
CMS Did Not Control Rising Power Wheelchair Spending Gao ID: GAO-04-716T April 28, 2004Medicare spending for power wheelchairs, one of the program's most expensive items of durable medical equipment (DME), rose 450 percent from 1999 through 2003, while overall Medicare spending rose by about 11 percent for the same period, according to the Centers for Medicare & Medicaid Services (CMS). This spending growth has raised concerns that Medicare made improper payments and has payment rates that are out of line with market prices. In May 2003, the Department of Justice indicted power wheelchair suppliers in Texas alleged to have fraudulently billed Medicare. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) contains provisions regarding DME, such as changing payment setting methods. GAO was asked to examine (1) steps taken by CMS and its contractors to identify and respond to improper payments for power wheelchairs and (2) how MMA will affect CMS's ability to set payment rates for DME. To examine these issues, GAO analyzed claims data reports for CMS's four DME regions, reviewed applicable legislation, regulations, and CMS and contractor documents, and interviewed CMS and contractor officials, DME suppliers and manufacturers, DME industry representatives, and beneficiary advocacy groups. GAO focused attention on region C, which includes Texas.
Although the four contractors that process DME claims identified escalating power wheelchair spending as early as 1997, CMS did not lead a coordinated response until September 2003. Inadequate information to review claims; limited resources, which caused contractors to scale back their claims review efforts; and flaws in the process to screen suppliers before they could bill Medicare left the program vulnerable to millions of dollars in claims paid improperly. Medicare spending for power wheelchairs grew fastest in region C, but resources to review claims were particularly constrained for that region's contractor. CMS has introduced a 10-point plan that appears to be a reasonable approach to reduce improper payments. The MMA requires CMS to use competitive bidding to set payment rates for DME. Competitive bidding shows potential for CMS to set market-driven payment rates to help keep pace with changes in prices for medical equipment.
GAO-04-716T, Medicare: CMS Did Not Control Rising Power Wheelchair Spending
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Testimony:
Before the Committee on Finance, U.S. Senate:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Wednesday, April 28, 2004:
Medicare:
CMS Did Not Control Rising Power Wheelchair Spending:
Statement of Leslie G. Aronovitz:
Director, Health Care--Program Administration and Integrity Issues:
GAO-04-716T:
GAO Highlights:
Highlights of GAO-04-716T, a testimony before the Committee on
Finance, U.S. Senate
Why GAO Did This Study:
Medicare spending for power wheelchairs, one of the program's most
expensive items of durable medical equipment (DME), rose 450 percent
from 1999 through 2003, while overall Medicare spending rose by about
11 percent for the same period, according to the Centers for Medicare
& Medicaid Services (CMS).
This spending growth has raised concerns that Medicare made improper
payments and has payment rates that are out of line with market
prices. In May 2003, the Department of Justice indicted power
wheelchair suppliers in Texas alleged to have fraudulently billed
Medicare. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) contains provisions regarding DME,
such as changing payment setting methods. GAO was asked to examine (1)
steps taken by CMS and its contractors to identify and respond to
improper payments for power wheelchairs and (2) how MMA will affect
CMS's ability to set payment rates for DME.
To examine these issues, GAO analyzed claims data reports for CMS's
four DME regions, reviewed applicable legislation, regulations, and
CMS and contractor documents, and interviewed CMS and contractor
officials, DME suppliers and manufacturers, DME industry
representatives, and beneficiary advocacy groups. GAO focused
attention on region C, which includes Texas.
What GAO Found:
Although the four contractors that process DME claims identified
escalating power wheelchair spending as early as 1997, CMS did not
lead a coordinated response until September 2003. Inadequate
information to review claims; limited resources, which caused
contractors to scale back their claims review efforts; and flaws in
the process to screen suppliers before they could bill Medicare left
the program vulnerable to millions of dollars in claims paid
improperly. Medicare spending for power wheelchairs grew fastest in
region C, but resources to review claims were particularly constrained
for that region's contractor. CMS has introduced a 10-point plan that
appears to be a reasonable approach to reduce improper payments.
Medicare Power Wheelchair Spending, Region C Compared to All Other
Regions:
[See PDF for image]
Note: Medicare spending includes federal payments and beneficiary cost
sharing.
[End of figure]
The MMA requires CMS to use competitive bidding to set payment rates
for DME. Competitive bidding shows potential for CMS to set market-
driven payment rates to help keep pace with changes in prices for
medical equipment.
GAO discussed these findings with program officials, who provided
technical comments.
www.gao.gov/cgi-bin/getrpt?GAO-04-716T.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Leslie G. Arnonovitz
at (312) 220-7600.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today as you discuss issues regarding Medicare
program payments for power wheelchairs. Medicare fee-for-service power
wheelchair spending is expected to total over $1 billion in 2003.
Spending for power wheelchairs rose 450 percent from 1999 through 2003,
according to the Centers for Medicare & Medicaid Services
(CMS),[Footnote 1] the agency responsible for managing the Medicare
program. In contrast, overall Medicare spending increased by about 11
percent during the same period. At about the same time, the number of
beneficiary claims for this item of durable medical equipment (DME)
nearly tripled, while the overall Medicare population increased by just
1 percent.[Footnote 2] Power wheelchairs rank among Medicare's most
expensive items of DME, and in 2003, Medicare paid about $5,000 for
each basic power wheelchair with standard options, and even more if
special accessories were included.
Escalating spending can be fueled by improper payments and payment
rates that are out of line with market prices. Improper payments can
result from mistakes on the part of suppliers, beneficiaries, or
beneficiaries' physicians. For example, improper payments can occur
when suppliers submit claims on behalf of beneficiaries who do not meet
Medicare's coverage criteria for power wheelchairs. Improper payments
can be due to fraud--intentional misrepresentation--and abuse. For
example, in May 2003, the Department of Justice began indicting some
physicians and wheelchair suppliers in Texas that were alleged to have
billed Medicare for power wheelchairs that beneficiaries never
received. Rising spending can also result when Medicare pays above-
market prices for power wheelchairs. We and the Department of Health
and Human Services (HHS) Office of Inspector General (OIG) have
reported that Medicare pays more than other insurers and public
programs for some items of DME--including power wheelchairs. As[Footnote
3] we have testified in the past, CMS and its contractors--insurance
companies that administer Medicare fee-for-service DME claims, called
DME regional carriers--have had difficulty setting payments for DME that
reflect current health care market prices. The[Footnote 4] Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
contains provisions to address some of the difficulties regarding DME
payment setting and requirements that will affect the conditions under
which power wheelchairs are provided.
[Footnote 5] My remarks today will focus on (1) steps taken by CMS and
its contractors to identify and respond to improper payments for power
wheelchairs and (2) how MMA will affect CMS's ability to set payment
rates for DME. Because about two-thirds of power wheelchair payments
were made by Palmetto Government Benefits Administrators in
2002--including those in Texas--I will be focusing some of my remarks
specifically on that DME regional carrier.
To evaluate the steps CMS and its contractors took in identifying and
responding to improper payments, we reviewed DME claims payment data
analysis reports on DME claims payment from CMS's statistical
contractor; written policies and procedures from CMS and its
contractors; budget and expense data for contractor activities;
Medicare coverage policies, which explain the criteria for determining
whether and under what conditions items are covered; and CMS's plan for
responding to payment problems with Medicare's power wheelchair
benefit. We also interviewed CMS and contractor officials, suppliers,
industry representatives, manufacturers, and beneficiary advocacy
groups. For DME claims payment data covering 1997 to 2002, we reviewed
CMS and contractor internal control procedures to help ensure that
these data were accurate, timely, and complete, and, where appropriate,
we tested data for internal consistency. We determined that these data
were adequate for addressing the issues in this testimony. Contractor
budget and expense data are self-reported by CMS or the contractors,
and we did not validate these data. To understand CMS's experience with
setting payments for DME that are in line with market prices, we
reviewed CMS regulations and other documents, and interviewed CMS
staff. We also reviewed our previous reports and reports issued by the
HHS OIG and CMS to identify alternative approaches to setting prices
for DME. We conducted our work from February through April 2004 in
accordance with generally accepted government auditing standards.
In summary, starting as early as 1997, contractors identified problems
with power wheelchair payments, but it was not until September 2003
that CMS began to lead a full-scale, coordinated effort to address
improper payments. Further, the agency did not address program
safeguard shortcomings that contributed to the growth in spending for
this benefit. These included inadequate information to properly review
and adjudicate claims; limited resources, which caused contractors to
scale back their claims review efforts; and flaws in the process to
screen suppliers before they could bill Medicare. CMS's recent
coordinated effort to reduce improper payments for power wheelchairs
through a 10-point plan appears reasonable, and the agency has at least
started, and in some cases has implemented, all of its elements. The MMA
requires CMS to use a new approach to setting DME payments by using
competitive bidding among suppliers to help determine payment
rates.[Footnote 6] The agency's use of Medicare's prior authority to
adjust DME payment rates has not enabled Medicare to keep pace with
changes in prices for medical equipment. As a result, Medicare often
pays more for a DME item than other public payers. In contrast,
competitive bidding shows promise as a way for CMS to use market forces
to set more reasonable payment rates.
Background:
Most Medicare beneficiaries purchase part B insurance, which helps pay
for certain physician, outpatient hospital, laboratory, and other
services; medical supplies and DME; and certain outpatient drugs. A
wide variety of DME items--including power wheelchairs--are covered if
they are medically necessary for the beneficiary's use in the home and
prescribed by a physician. Medicare part B pays for most DME using
state-specific fee schedules based on statewide average supplier
charges on Medicare claims paid during 1986 and 1987. Since then, fee
schedules have been updated for inflation in some years. Medicare pays
80 percent and the beneficiary pays the balance of either the actual
charge submitted by the supplier or the fee schedule amount, whichever
is less. If a beneficiary has supplemental insurance, the insurance may
cover the 20 percent copayment.
Four DME regional carriers are each responsible for reviewing and
paying claims submitted by outpatient providers and suppliers on behalf
of beneficiaries living in specific parts of the country.[Footnote 7]
For example, Palmetto is responsible for processing claims for
beneficiaries permanently residing in region C, which encompasses 14
states--including Texas and Florida--and Puerto Rico and the Virgin
Islands.
The DME regional carriers and other contractors conduct program
safeguard activities to identify and respond to improper payments for
DME claims (see table 1). In addition to the DME regional carriers,
three other contractors play important roles:
* The Statistical Analysis Durable Medical Equipment Regional Carrier
(SADMERC) analyzes claims data and identifies and reports trends in
billing by item, geographic region, supplier, and physician to DME
regional carriers and CMS staff.
* TriCenturion, LLC is a specialized program safeguard contractor
responsible for reviewing claims and investigating and developing fraud
cases for claims processed by region A. The other three DME regional
contractors conduct these activities themselves for the claims they
process.
* The National Supplier Clearinghouse (NSC) enrolls and authorizes
suppliers to bill Medicare by evaluating supplier applications and
performing on-site visits to suppliers' places of business.
CMS oversees these contractors' activities through various means, such
as performing yearly site visit evaluations, reviewing planned
activities, monitoring data and periodic reports, and conducting
regular conference calls and other monitoring activities.
Table 1: Contractors' Activities to Identify and Respond to Improper
Payments:
Responsibility: Analyze billing;
Contractor: SADMERC;
Activities: The SADMERC conducts ongoing data analysis and reporting
for the DME regional carriers and CMS. Its reports are used to
identify trends in payment and potential fraud.
Responsibility: Analyze billing;
Contractor: TriCenturion and DME regional carriers for regions B, C,
and D;
Activities: TriCenturion and the DME regional carriers for regions B,
C, and D analyze claims payment data to uncover improper payments or
to investigate and develop fraud cases.
Responsibility: Review claims against coverage criteria;
Contractor: TriCenturion and DME regional carriers for regions B, C,
and D;
Activities: These contractors are responsible for conducting medical
reviews of submitted claims either before or after payment to
determine if the claims should be, or should have been, paid. Claims
are reviewed to see if the beneficiaries' conditions meet Medicare
coverage criteria. Medical review can be conducted through automated
decisions to pay or deny claims based on coverage criteria or may
require complex medical reviews. Complex medical reviews are conducted
by clinical staff, such as a nurse or doctor, who examines additional
documentation provided by the supplier or the beneficiary's physician,
such as copies of the beneficiary's medical records or an evaluation
by a physical or occupational therapist of the beneficiary's ability
to walk. If medical review identifies claims that should not have been
paid, the DME regional carrier that paid the claim is responsible for
collecting overpayments and educating the supplier about appropriate
billing.
Responsibility: Investigate potential fraud;
Contractor: TriCenturion and DME regional carriers for regions B, C,
and D;
Activities: These contractors investigate cases of suspected fraud,
which can involve conducting a more detailed analysis of claims and
other investigative steps. Once a case has been developed, it is
referred to the HHS OIG or to law enforcement for prosecution.
Responsibility: Enroll suppliers;
Contractor: NSC;
Activities: NSC is responsible for verifying information on supplier
applications to ensure that suppliers meet 21 standards and that only
valid suppliers can bill Medicare. NSC also issues suppliers' billing
numbers, maintains a central database of information on DME suppliers,
reenrolls active suppliers, and assists with fraud and abuse
investigations.
[End of table]
Source: GAO.
CMS Slow to Respond to Escalating Power Wheelchair Payments, but Recent
Plan Appears Reasonable:
Although there were multiple warning signs over a 6-year period that
growth in claims and payments for power wheelchairs may have been
excessive, CMS did not lead a full-scale, coordinated effort to address
the issue until September 2003. CMS has recently taken actions to
reduce improper payments for power wheelchairs through a 10-point
action plan. In addition, Congress recently took steps intended to
bolster efforts to tackle fraud and abuse in the power wheelchair
benefit.
Despite Recurrent Warnings, CMS Did Not Lead Effort to Reduce
Escalating Power Wheelchair Payments Until 2003:
In 1997, CMS's data analysis contractor--the SADMERC--issued an alert
about rapid increases in the utilization of power wheelchairs. As part
of its data monitoring efforts, the SADMERC noted that payments for
power wheelchairs had tripled from October 1995 to March 1997, growing
from almost $8 million to about $24 million. For the next few years,
the SADMERC's reports continued to regularly highlight the abnormally
rapid growth in power wheelchair payments, identifying the states and
the suppliers for which claims volume was particularly high. Although
these reports went to agency officials responsible for ensuring that
program funds are safeguarded, CMS staff told us that their
contractors--the DME regional carriers--have primary responsibility
for using and responding to data indicating rapid increases in
utilization.
After reviewing SADMERC data in 1997, all four DME regional carriers'
medical directors became concerned and identified possible approaches
to address what they described as ’tremendous growth" in Medicare power
wheelchair spending. In a joint April 1998 memorandum sent to CMS, the
medical directors notified the agency of these concerns and requested
assistance to address power wheelchair payment growth. The 1998
memorandum cited a 472 percent increase in power wheelchair spending
from the first quarter of 1995 compared to the fourth quarter of 1997,
and proposed implementing changes in the coverage policy for power
wheelchairs. However, because of competing priorities, the DME regional
carrier medical directors never completed the policy revision, nor did
CMS direct them to do so. Figure 1 illustrates national Medicare power
wheelchair spending between 1997 and 2002.
Figure 1: National Medicare Power Wheelchair Spending:
[See PDF for image]
Note: Medicare spending includes federal payments and beneficiary cost
sharing.
[End of figure]
Between 1998 and 2000, DME regional carriers again tried to address
significant increases in power wheelchair payments by using the tools
that they already had to address improper payments. The DME regional
carriers examined power wheelchair claims through medical review--either
before or after claims payment--and investigated potential fraud cases.
However, CMS decreased the funding it provided to DME regional carriers
to conduct medical review activities about 22 percent, comparing fiscal
year 1999 and fiscal year 2003. Funding for medical review covers
activities such as computerized claims review and complex medical
review. For example, in fiscal year 2003, Palmetto received $3.1
million for medical review activities, about 15 percent less than it
received in 1999. The decline in funding for claims review is even more
dramatic when weighed against the increase in Medicare claims payment
by DME regional contractors. Overall, the amount of medical review
funding per $100 in submitted claims dropped over 50 percent from
fiscal year 1999 through 2003 for claims processed by the DME regional
carriers. Moreover, compared to the three other regions, Palmetto
received less medical review funding per $100 in submitted claims each
year from fiscal year 1999 through 2003. As figure 2 shows, Palmetto
had the highest volume of power wheelchair claims payment and its
payment growth was outstripping that of other regions. Although
Palmetto had more than tripled the number of submitted power wheelchair
claims on which it conducted complex medical review from fiscal year
2000 to 2002, it still only reviewed about 3 percent of its power
wheelchair claims in 2002. The number of claims that received complex
medical review in regions B, C, and D fell 39 percent from fiscal years
2001 through 2003. [Footnote 8]Medical review is one of the activities
that CMS has noted as saving Medicare about $17 for every dollar
spent.[Footnote 9]
Figure 2: Regional Medicare Power Wheelchair Spending:
[See PDF for image]
Note: Medicare spending includes federal payment and beneficiary cost
sharing.
[End of figure]
In the late 1990s, power wheelchair fraud had also surfaced as a
serious problem. Palmetto launched a major fraud investigation of power
wheelchair suppliers in Florida and other southeastern states in 1996.
This investigation uncovered fraudulent supplier activities, including
billing for services not rendered or not medically necessary and
delivering a less expensive power-operated vehicle when billing for a
more expensive power wheelchair. As a result of this investigation,
Palmetto prepared a fraud alert about power wheelchairs for other
contractors and investigative agencies, which CMS issued in June 1998.
While fraud alerts increase external awareness of potential
vulnerabilities, they also help the agency direct its efforts to
address potential fraud. In this case, however, CMS did not require DME
regional carriers to specifically scrutinize power wheelchair claims or
undertake any other efforts to identify fraudulent billing for this
item.
In June 2000, the DME regional carriers' medical directors sent a
second jointly signed memorandum to CMS officials. They noted that,
despite their efforts over a 2-year period to review power wheelchair
claims, payments for power wheelchairs continued to increase
significantly. The 2000 memorandum noted that Medicare spending for
power wheelchairs had grown by 869 percent from the first quarter of
1995 compared to the first quarter of 2000, and identified several
problems that the carriers could not address alone. Despite this second
warning from the contractors, CMS officials still did not attempt to
aggressively address escalating power wheelchair spending--for example,
it did not require a coordinated and consistent medical review or fraud
investigation strategy by DME regional carriers.
One problem cited in the 2000 memorandum was the disconnect between
documentation the physician is required to sign to order a wheelchair
and the program's coverage criteria. To be reimbursed for power
wheelchairs, suppliers must provide the carrier with a claim form and a
supporting document called a Certificate of Medical Necessity (CMN).
The physician or other clinician fills out a section of the CMN that
answers questions about the beneficiary's physical condition. However,
the CMN does not ask about the beneficiary's condition in enough detail
for the DME regional carrier to determine whether Medicare's coverage
criteria are met. For example, the CMN for power wheelchairs questions
whether the beneficiary requires a wheelchair to move about the home.
In contrast, Medicare's coverage policy for power wheelchairs is more
specific, stating that the item is covered "if the patient's condition
is such that without the use of a wheelchair, he would otherwise be
bed-or chair-confined."[Footnote 10] Further, Medicare's coverage
criteria state that the patient must be capable of safely operating the
controls of a power wheelchair--a question not asked in the CMN.
Despite the lack of a coordinated effort by CMS to curb rising costs,
we found that the DME regional carriers tried to address the problem on
their own. For example, several had shifted resources to medical
reviews of power wheelchair claims. Around March 2002, Palmetto began
to suspect another fraudulent wheelchair scheme was occurring in a
different state. Specifically, Palmetto began to suspect that
fraudulent power wheelchair claims had been submitted by suppliers in
Harris County, Texas, and other parts of the state. A Palmetto fraud
analyst had identified highly aberrant billing behavior for one
supplier, which he began to monitor. Palmetto analysts also discovered
that some suppliers were billing for a power wheelchair or for power
wheelchair accessories multiple times on behalf of the same
beneficiaries. By January 2003, Palmetto had referred many cases of
suspected fraud concerning suppliers of power wheelchairs to the Dallas
office of the HHS OIG for potential prosecution. Palmetto conducted
additional investigations and made referrals throughout 2003, and
investigations continue today. While Palmetto kept CMS informed about
its investigations, its efforts to develop suspected fraud cases in
2002 still did not convince CMS officials that it was time to take
decisive action.
Also in 2002, legitimate power wheelchair suppliers in Harris County,
Texas, became increasingly suspicious about other suppliers' activities
in their area. For example, the two suppliers with whom we spoke
learned that Medicare had paid other suppliers for power wheelchairs
that beneficiaries had never received. Suppliers told us that they,
other suppliers, and beneficiaries reported their suspicions to the
Palmetto fraud unit, the Medicare fraud hotline, the Federal Bureau of
Investigation, and the HHS OIG. The suppliers' suspicions were
supported by data indicating that, in 2002, 14 percent of Medicare's
power wheelchair spending was for beneficiaries in Harris County,
although only 1 percent of Medicare beneficiaries lived in that area in
2001.
Later in 2002, the CMS contractor responsible for DME supplier
enrollment--NSC--noted that Texas had an unusually high number of
suppliers compared to the number of beneficiaries residing there. Upon
CMS's request, NSC stationed one of its own employees in the Harris
County area to conduct supplier site visits. During these site visits
that began in September 2002, NSC's inspector found instances of
suppliers that did not have an appropriate place of business or had
moved the business without giving NSC a forwarding address. Based on
these findings, from August 2003 through January 2004, NSC's inspector
led an effort to conduct site visits of every active supplier in Harris
County, Texas, that had not received a site inspection since January
2003--about 1,300 suppliers.[Footnote 11] These inspections found
additional problems, including suppliers that lacked appropriate
inventory or insurance or did not meet other requirements for Medicare
DME suppliers. As a result, from September 2002 through March 2004, NSC
revoked 367 Medicare power wheelchair supplier billing numbers for
suppliers in the Harris County area. Supplier revocations occurred
because steps taken by NSC to enroll only legitimate suppliers were
unsuccessful. These steps did not protect Medicare from suppliers that
failed to meet the supplier standards or committed power wheelchair
fraud.[Footnote 12]
Three weaknesses in the supplier enrollment process left the Medicare
program vulnerable to unscrupulous suppliers. First, NSC failed to
verify submitted documents. NSC officials told us that they had
traditionally accepted copies of key documents, such as liability
insurance forms, at face value without verifying them. Failure to
verify the accuracy of these documents had enabled supplier applicants
to submit falsified papers and allowed them to become enrolled as
Medicare suppliers.
Second, the standards NSC uses to evaluate suppliers are not explicit.
Officials at CMS and NSC told us that some of Medicare's supplier
standards lack specificity as criteria for NSC to use in determining
the legitimacy of a supplier and played a role in allowing widespread
fraud in Harris County, Texas. For example, one standard requires that
the supplier "fills orders, fabricates, or fits items from its own
inventory or by contracting with other companies for the purchase of
items necessary to fill the order. If it does, it must provide, upon
request, copies of contracts or other documentation showing compliance
with this standard." This standard does not specify a reasonable amount
or type of inventory that would be expected, given the items the
supplier intends to provide to Medicare beneficiaries. Further, NSC
staff noted that the standard does not preclude a supplier from using
another supplier as its primary source of inventory--even if neither of
the two suppliers had enough inventory to be viable businesses.
According to NSC staff, the broad language used in this standard is
difficult to interpret and enforce. In their opinion, the broad
language helped allow the widespread fraud in Harris County.
Third, the predictability of site visits may render them less
effective. CMS requires NSC to conduct a site visit of a supplier to
assess compliance with the 21 standards before authorizing a new
supplier to bill Medicare, and to conduct a site visit every 3 years
thereafter, which is when suppliers must reenroll.[Footnote 13]
However, applicants know to expect a site visit prior to receiving a
supplier number and during a reenrollment period. Therefore, suppliers
that are intent on committing fraud can present an illusion of
legitimacy long enough to pass the inspection, knowing an inspector is
not likely to return for 3 years.
Recent Steps May Help Curb Improper Payments:
CMS officials indicated to us that they first became concerned about
power wheelchair billing in early 2003. At that time, CMS created a
task force to address abuses of the wheelchair benefit and developed a
10-point plan for addressing this potential abuse. CMS issued the plan
in September 2003. In December 2003, Congress passed the MMA, which
includes measures that should also help CMS deter improper payments for
power wheelchairs and other DME items.
CMS's 10-point plan provides a reasonable framework to strengthen the
processes that CMS and its contractors use to identify and respond to
improper payments for power wheelchairs. Two points in the plan
specifically address fraud, abuse, and utilization issues in Harris
County, Texas. They require CMS staff to review all payments for power
wheelchairs in the county and conduct mandatory training of all power
wheelchair suppliers in the county about Medicare coverage rules. CMS's
review of payments in Harris County is ongoing, and all suppliers in
Harris County had been trained as of October 2003. Other parts of the
10-point plan are in different stages, from planning or early
implementation to completion. Information on each of the 10 points is
presented in table 2.
Table 2: CMS's 10-Point Plan:
Point: 1; Purpose: Prevent fraudulent suppliers from enrolling in
Medicare for the sole purpose of receiving inappropriate payments;
Plans and actions: CMS stated that it would begin to aggressively
scrutinize all new applications. NSC stopped issuing new supplier
numbers in Harris County, Texas, in April 2003 and nationally in
September 2003. NSC began issuing supplier numbers again in November
2003.
Point: 2; Purpose: Identify and prevent inappropriate enrollment of
suppliers by providing a more detailed screening process, allowing CMS
the time needed to properly review applications, and providing
sanctions against suppliers abusing the enrollment process; Plans and
actions: CMS stated its intent to publish regulations to enhance the
ability to screen new supplier applications.
Point: 3; Purpose: Address rampant fraud and abuse in the Harris
County, Texas, area; Plans and actions: CMS stated that, effective
with the plan's issuance, all payments for power wheelchairs in the
Harris County, Texas, area would be individually approved by CMS staff
in the Dallas regional office.
Point: 4; Purpose: Ensure that all wheelchair suppliers in Harris
County, Texas, know and understand Medicare coverage rules; Plans and
actions: CMS stated that it would require all wheelchair suppliers in
Harris County, Texas to attend mandatory training on wheelchair
coverage and medical review policies.
Point: 5; Purpose: Quickly identify and punish fraudulent suppliers and
stop the improper "hemorrhaging" of Medicare dollars; Plans and
actions: CMS, DME regional carriers, and law enforcement agencies will
collaborate to process civil and criminal prosecutions. CMS also
pledged to use payment suspensions.
Point: 6; Purpose: Ensure that national policy accurately defines the
conditions under which Medicare will cover mobility products; Plans
and actions: CMS stated that it would finalize regulations revising
coverage policy for power wheelchairs and scooters; the policy will
require a medical provider to see a patient before prescribing a power
wheelchair or scooter.
Point: 7; Purpose: Accurately portray the clinical conditions for which
mobility products are reasonable and necessary and facilitate correct
billing and payment for mobility devices; Plans and actions: CMS
stated that DME regional carriers would immediately adopt local medical
review policies to educate suppliers and beneficiaries on Medicare's
coverage criteria for wheelchairs.
Point: 8; Purpose: When national billing and utilization trends are
identified, ensure that only claims that are reasonable and necessary
are paid and resolve national billing problems in a consistent manner;
Plans and actions: CMS stated that the DME regional carriers would
adopt a consistent approach to medical review.
Point: 9; Purpose: Ensure that Medicare is paying appropriately for
power wheelchairs; Plans and actions: CMS stated that it would develop
inherent reasonableness guidelines and apply this process first to
power wheelchairs.
Point: 10; Purpose: Put physicians and beneficiaries back in charge of
their mobility equipment decisions; Plans and actions: CMS stated that
it would clarify physicians' responsibilities for prescribing power
wheelchairs and educate beneficiaries about Medicare's coverage
criteria.
Source: GAO analysis of CMS's 10-point plan.
[End of table]
In December 2003, following release of the plan, the DME regional
carriers issued a bulletin outlining coverage criteria for power
wheelchairs. The bulletin sparked controversy among suppliers,
beneficiary advocates, and industry representatives, who argued that it
reflected a new, overly restrictive coverage policy for power
wheelchairs. CMS countered that the bulletin clarified long-standing
national policy, but because of the concerns raised, it rescinded the
bulletin. CMS is still considering whether change to coverage criteria
for power wheelchairs is needed.
One area beyond the scope of the 10-point plan is the marketing of
power wheelchairs to Medicare beneficiaries. Many individuals with whom
we spoke contended that abusive and misleading marketing have further
escalated utilization nationwide. A Texas supplier and CMS staff
reported that companies were soliciting business door-to-door or
promising free power wheelchairs to beneficiaries. Supplier
advertisements on the Internet, in print, and on television have used
the word ’free“ in connection with beneficiaries' receiving power
wheelchairs. Appendix II shows an example of an Internet advertisement
that appears to illegally offer to waive Medicare copayments.[Footnote
14] A statutory provision prohibits suppliers from calling
beneficiaries to solicit their business[Footnote 15] and this is
reflected in the supplier standards. CMS has authority, however, to
impose additional requirements[Footnote 16] and has not utilized this
authority to ensure that supplier marketing is not abusive or
misleading.
The MMA includes two provisions that are intended to help CMS curb
improper payments for power wheelchairs. First, it requires CMS to
develop a new set of quality standards for suppliers[Footnote 17] that
should complement the 21 standards suppliers must currently meet. The
MMA also includes a provision that requires a face-to-face examination
of a beneficiary by a physician, physician assistant, nurse
practitioner, or clinical nurse specialist to certify the medical need
for a power wheelchair.[Footnote 18] This provision is more stringent
than the prior regulation, which did not necessitate a face-to-face
appointment between a beneficiary and his or her prescribing health
care professional. CMS is now developing quality standards for oxygen
services and diabetic shoes, and regulations to implement the provision
regarding a face-to face examination.
New Authority Holds Promise for Improving CMS's Success in Adjusting
DME Payment Rates:
New authority and requirements for CMS in the MMA show more promise
than past agency authority for setting market-driven payment rates. In
the past, CMS generally was not successful in adjusting Medicare
payments for DME to keep pace with changes in prices for medical
equipment.[Footnote 19] As a result, Medicare often pays substantially
more for an item than other public payers. The MMA requires CMS to
begin using competitive bidding to set payment rates for DME.[Footnote
20] Competitive bidding has shown promise as a way to use market forces
to reduce payment rates for selected items.
Agency Attempts to Adjust DME Payment Rates to Reflect Market Prices
Largely Unsuccessful:
Prior to 1997, CMS could adjust DME payment rates that were inherently
unreasonable, but the process required was slow, cumbersome, and used
successfully only once. In the Balanced Budget Act of 1997,[Footnote
21] Congress responded to concerns about CMS's difficulties in
adjusting excessive payment rates by authorizing use of a streamlined
inherent reasonableness process for part B services (excluding
physician services) and equipment. Under this authority, CMS could
adjust payments by up to 15 percent per year using the streamlined
process or could use a process with formal notice and comment to make
larger adjustments. CMS published an interim final rule with comment
period in order to allow the DME regional carriers to use the authority
as soon as possible.[Footnote 22] CMS did not respond to comments
before its rule became effective.
DME regional carriers collected price data for eight groups of items
and then took the first steps in applying the inherent reasonableness
process to change payment rates for those items by publishing a notice
to suppliers in September 1998. At that point, industry groups and
suppliers expressed concerns about how the streamlined process had been
implemented and the appropriateness of how price data were collected.
Congress directed that we review the implementation of the streamlined
inherent reasonableness process and in 1999, suspended any use of this
authority until we issued our report and the agency issued a final rule
taking into account our findings and public comments.[Footnote 23] Our
July 5, 2000, report recommended, among other things, that CMS clarify
criteria for using its inherent reasonableness authority, strengthen
carrier data collection methodology, and monitor beneficiary access
after any payment changes.[Footnote 24]
Since issuance of that report, CMS has not used its inherent
reasonableness process to adjust payment rates. CMS issued an interim
final regulation to implement its authority on December 13, 2002, which
responded to comments on its previous regulation and our
report.[Footnote 25] The agency is still completing more specific
guidelines for revising payments, including how to collect data that
are valid and reliable. CMS and a contractor are developing the
guidelines and the agency intends to issue them by the end of 2004,
after which it can begin using the inherent reasonableness process. In
its 10-point plan, CMS has pledged to collect data on power wheelchair
prices as soon as these guidelines are finalized.
In our report, we recommended that CMS define in its regulation when
payment rates would be considered what the statute calls ’grossly
excessive“ and ’grossly deficient.“ It is in these situations that CMS
may use its inherent reasonableness authority. CMS indicated in its
regulation that it would adjust payment rates only when they were at
least 15 percent above or below a ’realistic and equitable“ amount. By
doing so, CMS limited its authority to adjust payment rates, since the
agency has statutory authority to adjust fees when the difference is
less than 15 percent.
New Authority Holds Promise to Help CMS Set Payment Rates Closer to
Market Prices:
The MMA gave CMS new authority and the requirement to begin using
competitive bidding to set payment rates for DME. Through competitive
bidding, suppliers provide information on amounts they would accept to
gain business from Medicare beneficiaries, and their bids are used as a
basis for the payment rate. In a demonstration of competitive bidding
for DME and other part B-covered items in two localities that concluded
in December 2002, fees set through bids were generally lower than fees
otherwise paid by Medicare. As a result, Medicare should achieve
estimated reductions in payments and beneficiary cost sharing that
should result in gross savings of $8.5 million.[Footnote 26] Products
chosen for the demonstration were among those with the highest Medicare
spending and considered by the agency to have the potential for
savings. The products chosen did not include power wheelchairs.
Estimated savings from the demonstration were accomplished without
significant reported effects on beneficiaries' access to competitively
bid products.
The MMA requires CMS to implement competitive bidding for DME, off-the-
shelf orthotics, and supplies in at least 10 of the largest
metropolitan areas by 2007, and 80 of these areas by 2009. CMS has the
authority to choose the items to be bid and the specific localities for
bidding. CMS has not decided whether power wheelchairs are among the
items to be included in its initial implementation. Having suppliers
offer bid prices appears to be a promising approach to achieve closer
to market prices, compared to the experience CMS has had with the
inherent reasonableness process. The MMA allows CMS to use information
from the competitive bidding process to adjust payment rates in other
localities.
We discussed our findings with program officials, who provided us with
technical comments, which we incorporated as appropriate.
Mr. Chairman, this completes my prepared statement. I will be happy to
answer questions you or other Members of the Committee may have.
Contact and Acknowledgments:
For further information regarding this testimony, please contact Leslie
G. Aronovitz at (312) 220-7600. Sheila K. Avruch, Jennie Apter, Emily
Gamble Gardiner, Sandra Gove, Joy L. Kraybill, Elizabeth T. Morrison,
Lisa Rogers, and Craig Winslow contributed to this statement.
[End of section]
Appendix I: States in DME Regional Carriers' Jurisdiction:
[See PDF for image]
Note: AS = American Samoa; GU = Guam; NMI = Northern Mariana Islands;
PR = Puerto Rico; and VI = Virgin Islands.
[End of section]
Appendix II: Internet Advertisement for Power Wheelchairs:
[See PDF for image]
[End of figure]
[End of section]
FOOTNOTES
[1] Until July 1, 2001, CMS was called the Health Care Financing
Administration (HCFA).
[2] Medicare defines DME as equipment that may be prescribed by a
physician for a patient's use for an extended period of time. This
equipment serves a medical purpose, can withstand repeated use, is
generally not useful in the absence of an illness or injury, and is
appropriate for use in the home. 42 U.S.C. ß 1395x(n) (2000).
[3] Testimony of Janet Rehnquist, Inspector General, Department of
Health and Human Services, Medicare Reimbursement for Medical Equipment
and Supplies, before the Senate Committee on Appropriations,
Subcommittee on Labor, Health and Human Services, and Education, 107th
Cong., 2nd sess., Washington, D.C.: June 12, 2002; U.S. General
Accounting Office, Medicare Payments: Use of Revised "Inherent
Reasonableness" Process Generally Appropriate, GAO/HEHS-00-79
(Washington, D.C.: July 5, 2000); and U.S. General Accounting Office,
Medicare: Home Oxygen Program Warrants Continued HCFA Attention, GAO/
HEHS-98-17 (Washington, D.C.: Nov. 7, 1997).
[4] U.S. General Accounting Office, Medicare: Challenges Remain in
Setting Payments for Medical Equipment and Supplies and Covered Drugs,
GAO-02-833T (Washington, D.C.: June 12, 2002).
[5] Pub. L. No. 108-173, § 302, 117 Stat. 2066, 2223.
[6] MMA § 302(b), 117 Stat. 2224.
[7] The four DME regional carriers are HealthNow New York, Inc. (region
A), AdminaStar Federal (region B), Palmetto Government Benefits
Administrators (region C), and CIGNA HealthCare Medicare Administration
(region D). See app. I for the states in each DME regional carrier's
jurisdiction. In this testimony, "states" refers to the 50 states, the
District of Columbia, U.S. territories, and the Commonwealth of Puerto
Rico.
[8] This information was not available from region A.
[9] U.S. Department of Health and Human Services, Centers for Medicare
& Medicaid Services, Justification of Estimates for Appropriations
Committees, Fiscal Year 2004 (Washington, D.C.: n.d.) CMS reported data
on past savings from fiscal years 2002 through 2004.
[10] Coverage Issues Manual, rev. 36, Section 60-9, www.cms.gov/
manuals/06_cim/ci60.asp.
[11] NSC did not visit active suppliers that were large chains,
physicians, optometrists, and pharmacies.
[12] Suppliers must meet 21 standards. 42 C.F.R § 424.57(c)(1) - (21)
(2003) (in effect since December 11, 2000). Suppliers must be in
compliance with these standards in order to obtain and maintain their
Medicare billing privileges.
[13] CMS does not require NSC to visit every supplier. Suppliers that
are Medicare-enrolled entities (hospitals, skilled nursing facilities,
home health agencies, physicians, and ambulatory surgical centers) and
existing supplier chains with 25 or more locations are excluded from
site visits.
[14] Medicare prohibits suppliers from waiving copayments routinely or
when waiver is offered as part of an advertisement or solicitation. 42
U.S.C. § 1320a-7a(a)(5) and (i)(6)(A) (2000).
[15] 42 U.S.C. § 1395m(a)(17) 2000.
[16] 42 U.S.C. § 1395m(j)(1)(B)(ii)(IV) (2000).
[17] MMA § 302(a)(1), 117 Stat. 2223.
[18] MMA § 302(a)(2), 117 Stat. 2224.
[19] GAO-02-833T.
[20] MMA § 302(b), 117 Stat. 2224.
[21] Pub. L. No. 105-33, § 4316, 111 Stat. 251, 390.
[22] 63 Fed. Reg. 687 (Jan. 7, 1998).
[23] Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. No. 106-113, App. F, § 223, 113 Stat. 1501, 1501A-352
(signed into law November 29, 1999).
[24] GAO/HEHS-00-79.
[25] 67 Fed. Reg. 76,684.
[26] CMS conducted the demonstration in Polk County, Florida, and in
the San Antonio area in Texas for selected items of DME, orthotics,
prosthetics, and supplies (DMEPOS). Two evaluations of the
demonstration have been published. See U.S. Department of Health and
Human Services, Health Care Financing Administration, Evaluation of
Medicare's Competitive Bidding Demonstration for DMEPOS: First Year
Annual Evaluation Report (Baltimore, Md.: September 2000, Revised
January 2001) and U.S. Department of Health and Human Services, Centers
for Medicare & Medicaid Services, Evaluation of Medicare's Competitive
Bidding Demonstration for DMEPOS: Second Year Annual Evaluation Report
(Baltimore, Md.: April 2002).
