AAHomecare lists flaws in government oxygen study

Sunday, October 22, 2006

ALEXANDRIA, Va. - Due to its "deeply flawed" methodology, Medicare shouldn't use the Office of Inspector General's recent study on the cost of home oxygen therapy to determine policy, AAHomecare warned last week.

Shortly after the OIG released its study last month, AAHomecare commissioned Morrison Informatics to analyze the study. Previously, Morrison released an AAHomecare-commissioned study that argued services make up 72% of the costs of providing home oxygen.

The OIG's study, however, downplays services and argues that CMS should reduce the 36-month cap on Medicare oxygen reimbursement to 13 months, resulting in $3.2 billion in savings over five years.

In its Oct. 18 rebuttal, Morrison expressed the following concerns with the OIG's study:

- The study examines only certain costs associated with home oxygen therapy and, therefore, it can't be used to justify a reduction in the payment period to 13 months. The cost of oxygen equipment comprises only 28% of total costs.

- The study isn't based on a statistically valid sample of beneficiaries.

- The study's savings estimate is not accurate, since it does not reflect the payments Medicare would have to make to reimburse providers for services that are currently covered in the monthly bundled payment rate. The estimate also includes savings that would not be scored as savings by the Congressional Budget Office and CMS's Office of the Actuary.

- The study states that most non-equipment service costs were not studied, something CMS also acknowledged in its response to the OIG. As a result, the savings estimate does not account for the full costs that Medicare will incur.

- The VA model cited by the OIG is completely different than the Medicare model. Once all comparative costs incurred by the VA are accounted for, its payment levels for home oxygen therapy approach Medicare's current payment levels.

- The OIG report did not account for financial savings from the Medicare Modernization Act of 2003, which mandated two reimbursement reductions for oxygen: the Federal Employees Health Benefits Plan median pricing adopted in 2005, resulting in an 8.6% savings; and competitive bidding, resulting in a projected 10% savings. Nor did the OIG account for savings from the Deficit Reduction Act of 2005, which CMS will realize in 2009.

- A 13-month cap would harm vulnerable beneficiaries, especially since the effects of these policies have not yet been studied.