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.