GAO: CMS failed to stem rising tide

Monday, May 31, 2004

WASHINGTON - Although CMS identified improper payments for power wheelchairs in early 1997, the Medicare program did not lead “a full-scale, coordinated effort” to address those improprieties until September 2003 when the Wheeler Dealer scandal erupted in Houston, according to testimony by the GAO’s Director of Healthcare Leslie Aronovitz.

The GAO blamed inadequate claims information, scarce resources at CMS and flaws in the supplier screening process for the vulnerability that resulted in millions of dollars in improper payments.

The accounting watchdog reached its findings after a two month study of 1997-2002 claims data from the SADMERC, written policies and procedures by CMS and the DMERCs, coverage guidelines and budget-and-expense data for contractor activities. The GAO also interviewed CMS and DMERC officials, as well as suppliers, manufacturers and other industry representatives.

In 1997, the SADMERC (Statistical Analysis Durable Medical Equipment Regional Carrier) alerted CMS to a tripling in payments for power wheelchairs between October 1995, when total expenditures amounted to $8 million, and March 1997 when payments had climbed to $24 million.

In 2003, Medicare paid about $1.2 billion for power wheelchairs.

After 1997, the SADMERC continued to highlight the rapid rate of increase and even went so far as to identify what states and suppliers were responsible for the escalating payments. But CMS did little in response, claiming it was the DMERCs’ responsibility to respond to issues related to rising utilization, said the GAO.

After noting a 472% increase in spending for power chairs between the first quarter of 1995 and the fourth quarter of 1997, the DMERC medical directors sent a memo to CMS, proposing changes to the coverage policy.

“Because of competing priorities,” the DMERCs’ medical directors never completed the policy revision, according to the GAO.

Between 1998 and 2000, the DMERCs continued to try to address the escalating costs but were hampered by declining resources allocated by CMS. CMS decreased funding for medical review activities by 22% between 1999 and 2003.

The situation in Region C was especially acute. The amount of funding for medical review per $100 in submitted claims dropped by 50% between 1999 and 2003. In 2002, the Region C carrier, Palmetto GBA, was reviewing just 3% of its power wheelchair claims.

In Regions B, C and D, the number of claims that received complex medical review fell by 39% between 2001 and 2003. The lapse is especially remarkable in light of the fact that medical review saves $17 for every dollar spent, according to CMS.

By the first quarter of 2000, with power chair payments up 869% over the same quarter five years earlier, CMS still failed to require the carriers to develop a “coordinated and consistent medical review or fraud investigation strategy,” said the GAO.