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WASHINGTON — A federal program with a history of making billions of dollars in erroneous payments for wheelchairs, oxygen machines and other medical equipment continues to grossly underestimate its own mistakes, according to federal investigators.
The Medicare program spends about $10 billion annually in payments to suppliers of medical equipment for the elderly and disabled. For years, federal inspectors have documented payment errors that expose the program to fraud and abuse. Last year the inspector general who oversees Medicare estimated the waste could be as high as $2.8 billion annually.
A sampling of payments for fiscal year 2008 conducted by an outside contractor found that roughly 70 percent should not have been approved, according to a new report by the inspector general for the Department of Health and Human Services. But Medicare estimated the error rate at less than 10 percent, citing its own contractor, AdvanceMed of Richmond, Virginia. The review was not comprehensive and consisted of a sample of just 250 payments.
Peter Ashkenaz, a spokesman for the Centers for Medicare and Medicaid Services, said Tuesday that the agency "has made significant changes to how it measures the error rate and, in addition, has clarified its medical review instructions for contractors."
Ashkenaz added that AdvanceMed is reviewing fiscal 2009 payments to make sure all errors are accurately counted. A company spokesman could not immediately comment on the report Tuesday afternoon.
Sen. Charles Grassley, R-Iowa, requested the review after uncovering similar discrepancies with the agency's fiscal 2006 error numbers.
"This report reveals that the way the government is tracking erroneous Medicare payments for durable medical equipment still isn't working," Grassley said in a statement. "Medicare officials owe it to taxpayers and beneficiaries to get a handle on the level of waste, fraud and abuse."
Medicare officials estimated their total payment error rate for fiscal 2008 was 3.6 percent. That figure includes payments to doctors and hospitals, along with payments for medical equipment.
An error does not necessarily mean the government was defrauded, but it can leave the program open to fraud.
More than 100,000 companies are registered as suppliers for Medicare. Acting as government contractors, they generally handle the logistics of submitting a claim and obtaining government payment for patients' medical equipment.
The largest equipment suppliers include companies like Lincare Holdings Inc., which provides home oxygen equipment, and Invacare Corp., which distributes wheelchairs, adjustable beds and other supplies.
The majority of last year's errors occurred because Medicare contractors reimbursed suppliers despite incomplete documentation that the the equipment was necessary, according to the inspector general. Instead of relying on patient medical records and physician prescriptions, Medicare's contractors often used documents from supply companies and prior Medicare claims.
Medicare's own rules state that information from a patient's medical records must show the need for the reimbursed device.
However, Medicare officials acknowledged those rules are "vague," when it comes to how contractors may interpret medical information.
"Contractors have interpreted the manuals differently, especially regarding the use of clinical judgment," Charlene Frizzera, acting head of the Centers for Medicare and Medicaid Services, said in a letter responding to the report.
Frizzera said the agency plans to clarify how much interpretation contractors are permitted when processing payments. She also said the agency plans to bolster its review of claims that are most vulnerable to fraud — including those for scooters and oxygen machines — by conducting interviews with the requesting patients. She added, however, that "it would be very resource-intensive for us to do this type of review" for all types of equipment.
