The government paid more than $1 billion in questionable Medicare claims for medical supplies that showed little relation to a patient's condition, including blood glucose strips for sexual impotence and special diabetic shoes for leg amputees, congressional investigators say.
Billions more in taxpayer dollars may have been wasted over the last decade because the government-run health program for the elderly and disabled paid out claims with blank or invalid diagnosis codes, such as a "?" or "zzzzz." Medicare officials say even smiley-face icons could have been accepted.
The report by Republicans on the Senate Homeland Security investigations subcommittee, obtained by The Associated Press, is the latest to detail lax oversight in the $400 billion program that has been cited by government auditors as a high-risk for fraud and waste for nearly 20 years.
The panel's review of millions of claims submitted by sellers of wheelchairs, drugs and other medical supplies on behalf of Medicare patients from 2001 to 2006 found at least $1 billion in which the listed diagnosis code appeared to have little, if any, connection to the reimbursed medical item.
For example, blood glucose test strips are almost exclusively used for diabetics. But Medicare paid millions of dollars to medical suppliers for the test strips without question based on non-diabetic diagnoses ranging from typhoid and bubonic plague to chronic airway obstruction and "psychosexual dysfunction."
Wheelchair for sprained wrist
Other questionable claims included wheelchairs or wheelchair accessories for patients listed as having a deformed nose or sprained wrist; special shoes for diabetics or shoe inserts for those with leg amputation or "precocious sexual development"; and walkers for people diagnosed with paraplegia.
"Since when did doctors start prescribing blood glucose test strips for the bubonic plague?" Minnesota Sen. Norm Coleman, the top Republican on the panel said Tuesday. "CMS's review process simply doesn't check to see whether the claim makes sense and that leaves Medicare vulnerable to fraud, waste, and abuse. Bottom line: we need to know where our Medicare dollars are going."
The Senate report urged the Centers for Medicare and Medicaid Services to consider new procedures to prevent fraud by reviewing whether diagnosis codes are medically related to the supplies being reimbursed, and to reject claims with any invalid or incorrect codes. Currently CMS generally just checks to see if the coding is listed in the proper format before making payment.
The Senate investigation was conducted by both Democratic and Republican committee staff. Sen. Carl Levin, D-Mich., who chairs the subcommittee, declined to sign onto the final report, citing lack of time for review due partly to congressional efforts in the Wall Street bailout.
Responding in the report, CMS said it had taken steps in recent years to identify potential fraud and abuse, such as creating warning flags in the processing system for high-risk items such as glucose strips.
CMS also argued it should not be faulted for failing to review Medicare claims prior to 2003 that had questionable or invalid diagnosis codes. The agency contended that even though diagnosis codes had been widely used on forms since 1991, federal regulations were ambiguous until 2003 as to whether the codes were actually required to process a claim. As a result, if claims forms had blanks, question marks or even icons such as a smiley face for the diagnosis code, they might have been improper but they did not technically bar payment, CMS said.
"This report highlights a vulnerability that we addressed five years ago related to our review of claims for medical services and supplies," CMS spokesman Jeff Nelligan said Tuesday. "CMS has always used clinical information, including diagnosis codes, to target certain vulnerable and high risk claims." He said that CMS has validated diagnosis codes on all medical equipment claims since 2003.
Investigators, however, noted CMS has pledged for many years to fix problems with little success.
Years of problems
For example, CMS put flags in its system to help check diagnosis codes listed in claims for glucose strips in response to a June 2000 report by the Health and Human Services Department's inspector general that warned of the potential for fraud. Yet the Senate investigation found that despite reforms, CMS in 2006 still paid $535,032 for glucose strips with the highly questionable diagnosis of chronic airway obstruction — an amount roughly equivalent to the $526,059 paid in 2001 for the same cited diagnosis.
- Medicare paid suppliers with little question after the suppliers submitted claims forms with blank or otherwise invalid diagnosis codes. Roughly $4.8 billion in payments were made from 1995 to 2006 despite invalid coding or nothing listed at all; about $23 million of that amount was paid after 2003, when federal rules made clear the codes were required. Based on a sample of 2,000 of those invalid coding claims, investigators found more than 30 percent could not be verified as legitimate and "bore characteristics of fraudulent activity," such as doctors who were actually dead, retired or who denied authorizing the treatment or making the diagnosis.
- The CMS contractor responsible for analyzing Medicare claims data maintained information that was incorrect and out of date. Investigators said that raised questions as to whether the contractor had effectively carried out its role of identifying potential waste and fraud; CMS has since changed contractors.
- Federal regulations require that CMS pay only for items that are deemed "medically necessary." Yet CMS does not examine diagnosis codes to determine whether the equipment is actually necessary before making payment; the agency instead relies on medical suppliers to maintain paperwork from doctors attesting to that fact. Such paperwork is not routinely submitted, and only 3 percent of claims are reviewed after payment is made.
Tyler J. Wilson, president of the American Association for Homecare, which represents manufacturers and sellers of medical equipment, agreed that Medicare should check claims forms more carefully. He attributed the Senate's findings to both "criminal behavior" as well as "a lack of familiarity" with the Medicare system among newer medical suppliers.
"We'll take our share of the responsibility that all providers have a duty to be precise when filling out any claims form," he said. "We're concerned about Medicare officials' failure to impose upfront controls to prevent people with no intention of following procedures from getting payment."
The report comes as advocacy groups such AARP have urged Congress and the next president to make changes to the rapidly growing domestic entitlement program to stem rising health care costs while preserving benefits for millions of the elderly and disabled.
Sen. John McCain, the Republican presidential nominee, has promised to balance the budget by the end of his first term if elected in part by curbing wasteful spending and overhauling costly entitlement programs. Sen. Barack Obama, the Democratic nominee, also has pledged generally to reexamine "programs that are wasting your money."
CMS has acknowledged that its medical equipment program is susceptible to fraud and waste, estimating in 2007 that $1 billion of the roughly $10 billion in Medicare payments over a one-year period were improper. A recent report by the HHS inspector general suggested that annual waste could actually be as high as $2.8 billion, citing particularly shoddy government oversight.