"Out-of-date HCFA billing codes seem to be costing taxpayers and Medicare beneficiaries hundreds of dollars more for durable medical equipment (DME) than are available through supply catalogs," Grassley said. "And because DME is Medicare Part B, when HCFA pays too much, then the beneficiary pays more out-of-pocket as well. HCFA billing codes have not kept up with the times. They're still paying ?custom fit' prices which the use of materials such as velcro made obsolete years ago. They simply haven't kept up."
This latest incident started when an Iowa constituent, Mr. Joseph Costa, contacted Grassley's office about a hand/wrist orthotic device HCFA had purchased for his wife. HCFA approved a price of $470.72 for the device. Of that amount, HCFA paid $376.58 and charged the Costa's a $94.14 co-pay. However, Mr. Costa later saw the exact same hand/wrist device in a medical supply catalog priced at only $120. He sent a copy of his Medicare Summary Notice, along with a copy of the catalog, to Sen. Grassley for further investigation. Grassley serves as Chairman of the Senate Special Committee on Aging.
"It's ridiculous to charge a Medicare beneficiary a co-pay almost as much as what the entire device could be purchased for out of a standard supply catalog," Grassley said. "Unfortunately, this does not appear to be an isolated error. Rather, I fear it is indicative of a systemic HCFA problem with excessive payment schedules and out-of-date billing codes. I have asked the General Accounting Office to examine the billing situation with regard to durable medical equipment and orthotics."
HCFA's fee schedules are tied to their billing codes for medical equipment and orthotic devices. Each billing code represents groups of products intended to be similar. Accordingly, those products covered by a billing code are reimbursed at the established fee schedule rate. When DME companies submit a Medicare claim, they must specify the billing code that they believe best describes the specific item provided to the Medicare beneficiary and are reimbursed at that rate.
"The use of pre-fabricated items, coupled with efficient manufacturing practices, have decreased manufacturing costs," Grassley said. "The fee schedule payments for some of these items
are based on what Medicare allowed 10 years ago. But 10 years ago hand/wrist devices, like many other orthotic products, were custom fit and custom made. The use of velcro and other such materials, pre-fabricated items have become the norm rather than the exception. Yet, HCFA apparently hasn't accounted for these massive cost-cutting changes."
Many experts think that excessive payments to DME companies could be avoided if HCFA's billing codes for many kinds of medical equipment were less broad and easier to interpret. Because each billing code for medical equipment and supplies can include numerous products, HCFA does not know for which product it is paying. Even DME companies have difficulty determining the appropriate code to charge Medicare.
"Recently, I introduced legislation intended to address HCFA's inability to appropriately identify and price the medical equipment and supplies for which it pays," Grassley said. "My legislation would mandate the use of product specific codes known as universal product numbers (UPNs). In other words, HCFA would know exactly what it's paying for. It is my hope that UPNs will positively affect HCFA's reimbursement of all durable medical equipment, particularly orthotic devices."
In addition to asking the GAO to review HCFA's DME billing process, Grassley's letter asked HCFA for a detailed review of the Costa matter and to conduct an internal review to determine whether this incident was isolated or representative of a systemic problem.