GAO: Reduce Home Oxygen Pay

WASHINGTON — In spite of the fact that Congress has
reduced rates — several times since 1998 — capped
rental payments at 36 months and directed CMS to use competitive
bidding, the Government Accountability Office thinks Medicare’s
reimbursements for home oxygen should be lower still.

“Medicare’s payment for home oxygen overcompensates suppliers
for providing stationary oxygen concentrators,”  the GAO
stated in a Feb. 14 report, titled “Medicare
Home Oxygen: Refining Payment Methodology Has Potential to Lower
Program and Beneficiary Spending.”

“Available data indicated that Medicare’s payments for
stationary concentrators were high relative to the estimated cost
of this equipment and the minimal servicing it requires,” the
report said.

The GAO based its recommendation on comparing Medicare rates to
those of eight private insurers, the Department of Veterans Affairs
and CMS’ competitive bidding program.

According to the report, if Medicare had used the payment rates
of the lowest-paying private insurer, it could have saved about
$670 million of the estimated $2.15 billion it spent on home oxygen
in 2009. Using the VA’s payment methodology, savings could have
been $410 million to $810 million. Basing Medicare’s rates on data
from the competitive bidding program, 2011 rates could have saved
$700 million.

In addition, the report pointed to Medicare’s bundling of
payments for stationary equipment with payment for oxygen refills,
which are required only for certain equipment types. “Thus, when a
supplier furnishes oxygen equipment that does not require refills,
it may still receive payment for them,” the GAO said. “Further,
there isn’t any incentive for suppliers to provide portable
equipment because portable refills are paid for regardless of
whether the portable equipment is provided.”

Despite reductions in rates and in the number of suppliers from
2001 through 2008, the GAO said utilization trends show overall
beneficiary access to home oxygen has not diminished. But the
relative mix of equipment has changed: Use of more
service-intensive portable equipment decreased and use of only
stationary oxygen concentrators increased.

“Medicare’s rental payment for stationary concentrators, which
includes payment for portable oxygen refills although they are not
provided to about one-third of home oxygen beneficiaries, may
discourage provision of portable equipment. The equipment might not
always be accessible to beneficiaries who would benefit from using
it as well as a stationary concentrator,” the report said.

As a result of its findings, the GAO stated, “Congress should
consider reducing home oxygen payment rates.”

While the Department of Health and Human Services agreed that
payments for home oxygen are “excessive,” the report said, HHS
disagreed that payment for portable oxygen refills should be
removed from the stationary equipment rate because it would not
yield immediate savings.

The American Association for Homecare had its own response to
what it called the “disappointing” report:

“AAHomecare strongly disputes a number of flawed comparisons
made in the report as well as the conclusion reached by GAO, and
the Association will issue a rebuttal to the agency which we will
share with Congress … The GAO’s comparisons between Medicare
rates and the very different VA payment model and the low-ball
rates from the poorly designed bidding program raise numerous
questions about the reliability of the GAO conclusions.”

View the full GAO report.