"Unfortunately for the American taxpayer, the Medicare program simple doesn't know what it gets when it pays for it," Grassley said. "Medicare pays one rate for a broad range of medical supplies regardless of actual cost or quality. Let's say I am a medical supplier. I supply large volumes of catheters for use by Medicare patients. I have some catheters that cost me $1, and I have some that cost $17. As a smart business person, which one do I supply if I'll be reimbursed $10 for my product, regardless of quality? It doesn't take a rocket scientist to figure out what happens. In fact, any kid setting up a lemonade stand this summer could make that business decision."
Earlier in the day, Grassley testified before the Senate Governmental Affairs' Permanent Subcommittee on Investigations (PSI). The Iowa senator serves as Chairman of the Special Committee on Aging. The PSI hearing was examining the rising trend of fraud and waste within Medicare. Grassley unveiled a new independent audit by the General Accounting Office (GAO) report on durable medical equipment (DME). Grassley noted that the GAO found two basic problems with how the Health Care Financing Administration (HCFA) pays for DME. The first problem according to the GAO report, is that "HCFA does not know specifically what products it is paying for when it pays Medicare claims for medical equipment and supplies." The second problem GAO identified is that HCFA "reimburses large suppliers and individual beneficiaries the same amounts for medical equipment and supplies, even though large suppliers negotiate substantial discounts with manufacturers and wholesalers, while individual beneficiaries pay retail prices."
"Can you imagine a small business owner paying someone for supplies to be delivered to their customers without knowing exactly what it is they're paying for?" Grassley asked. "A main street business would have a hard time staying afloat. Whatever happened to the universal consumer gauge for quality control: You get what you pay for? HCFA doesn't know exactly what equipment and supplies it's buying because it doesn't require suppliers to identify specific products on their Medicare claims. So Medicare pays suppliers the same amount for all the products covered by a broad billing code, regardless of the different types, qualities and market prices."
The GAO report said that HCFA's billing code system provides insufficient information for properly identifying products billed to Medicare. "I believe HCFA should be required to employ product-specific codes, just like those used to scan items at the grocery store," Grassley said.
Grassley said that his bill will require HCFA to use universal product numbers which would identify the individual medical product for which it is paying. This will ensure Medicare recipients and the taxpayers get exactly what they pay for. Grassley noted during the hearing that other agencies with past billing problems, like the Defense Department, are moving toward a product-specific code system.
"Fraud, waste and abuse are enemies of the health care system," Grassley concluded. "It's diverting scarce tax dollars away from health care services for our children, spouses, grandparents, and elderly parents. It is costing us unnecessary millions every day. Money that can, and should, be put to better use. Considering that Medicare paid about $4.3 billion for medical equipment and supplies in 1996, it's alarming to consider the amount possibly spent on illicit goods and services. We have to fix a billing system that's just plain broke. Although it would be impossible to erase every trace of waste, fraud and abuse, it is possible to crack down on the broken payment system.