OIG: Medicare should reduce O2 reimbursement 10% to 20%

September 13, 2004 WASHINGTON -  The OIG issued its long-awaited report on home oxygen reimbursement this morning and called on CMS to reduce payment rates by 10% to 20%. The OIG based its recommendation on payment rates provided by 51 plans administered by the Federal Employees Health Benefits Program and 55 plans administered by Medicare + Choice (Medicare HMOs). For oxygen concentrators (E1390), Medicare paid 15.1% more than FEHBP plans and 17% more than Medicare + Choice plans.  For liquid oxygen (E0439) , Medicare paid 20% more than FEHBP plans and 20.5% more than Medicare + Choice plans. For portable gas oxygen (E0431), Medicare paid 11.5% more than FEHPB plans and 15.9% more than Medicare + Choice plans. These findings contrast significantly with an AAHomecare study, also released today, that surveyed 107 FEHBP plans and found “virtually no difference between the median FEHBP price and the median Medicare payment rates for home oxygen.” As the industry grapples with this 10%-20% cut, critics of the OIG's findings are likely to take issue with the government's methodology. In its report, the OIG stated that it mailed surveys to all 198 FEHB and 146 Medicare+Choice plans in September 2003. Enrollment in these plans totaled approximately 14 million in 2002. The OIG received responses from 322 of the 344 plans; of those, 298 plans met the study criteria. From there, the OIG consolidated the 298 plans according to corporate ownership and identified 164 distinct plans. In the tables that cite the specific percentage differences between Medicare and the other government-run insurance programs, the study references responses from 21 to 55 different plans related to the different product categories. Presumably, those plans are derived from the 164 distinct plans identified above. Meanwhile, AAHomecare commissioned Morrison Informatics, Inc. to conduct a nationwide, comprehensive statistical survey of FEHBP pricing in July and August of this year. On average, according to the AAHomecare study, FEHBP plans pay a monthly rate of $227.50 for stationary oxygen while Medicare pays $228.80 (HCPCS codes E0424, E0439, and E1390). The study found less than a 1% difference in rates for portable oxygen. In the MMA, Congress has authorized CMS to reduce payment Jan. 1 for home oxygen reimbursement using data from the OIG report issued today. The MMA also has called for reimbursement cuts Jan. 1 of up to 20% in a handful of key DME product categories, including nebulizers, hospital beds and power wheelchairs. AAHomecare plans to release the full findings of its report by the end of this week.