GAO on oxygen: Stop bundling payments

Monday, February 14, 2011

WASHINGTON – Congress should consider reducing payments for home oxygen therapy, according to a report issued this week by the Government Accountability Office (GAO).

The 58-page report, titled “Refining Payment Methodology Has Potential to Lower Program and Beneficiary Spending,” recommends that CMS remove payment for portable oxygen refills from the payment for stationary equipment.

The GAO came to this conclusion after interviewing eight private insurers. It found, for example, that if Medicare had used the methodologies and payment rates of the lowest-paying private insurer, it could have saved about $670 million of the estimated $2.15 billion it spent on oxygen in 2009.

The biggest problem with Medicare’s methodology and payment rates for oxygen, according to the GAO: “Medicare combines, or bundles payment 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 noted that while utilization trends show overall beneficiary access to oxygen has not diminished despite reductions in payment rates and in the number of suppliers from 2001 to 2008, the relative mix of equipment has changed.

“Use of more service-intensive portable equipment decreased and use of only stationary oxygen concentrators increased,” the GAO stated. “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.”

Responding to the GAO report, the Department of Health and Human Services commented that payments for oxygen are “excessive,” but it disagreed with the office’s recommendation because it doesn’t believe it would yield immediate savings.

To read the report, go to