Excessive Payments for Medical Supplies Continue Despite Improvements Gao ID: T-HEHS-96-5 October 2, 1995

Despite improvements by the Health Care Financing Administration (HCFA) in claims monitoring, problems in payments for medical supplies persist. The inflexibility of Medicare's fee schedule results in payment rates that are higher than wholesale and many retail prices. In addition, in the case of many part A claims, claims processing contractors do not know what they are paying for, and in the case of part B claims, have not had a basis for questioning unreasonably high charges. Neither type of contractor has been able to test claims for possible duplicate payments. For these reasons, Medicare has lost hundreds of millions of dollars in unnecessary payments. By obtaining the legislative authority to modify payment rates in accordance with market condition, requiring providers to itemize claims, and introducing the relevant medical policies before paying for new benefits, HCFA could reduce its dollar losses arising from medical supply payments. Contractors could avoid paying unreasonable charges and making duplicate payments.

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