After adding a 30-percent adjustment to VA payments to account for the higher costs associated with servicing Medicare patients, the average VA monthly payment was $200, or almost 38 percent less than Medicare’s allowance of $320. Access to Portable Equipment and Refills Warrants HCFA Monitoring

The upcoming reductions in the modality-neutral Medicare payment rates have raised concerns that Medicare patients will have less access to (1) stationary liquid systems, from which patients can refill portables; (2) refills of gas or liquid portable units for patients that have concentrators; and (3) new lightweight, but more expensive, portable systems. The upcoming reduction in Medicare payment rates, however, could lead some suppliers to shore up their profits by offering only oxygen concentrators for stationary systems, which would also reduce access to liquid portable refills from stationary units. Access to Portable Units and Refills

Our study included an analysis of the number of Medicare and VA patients that were provided portable units. The Balanced Budget Act of 1997 allows HHS to establish separate payment rates and categories for different types of home oxygen equipment, as long as the adjustments are budget neutral. HCFA Has Not Developed Service Standards for Home Oxygen Suppliers

Although Medicare payments for home oxygen include reimbursement for services, HCFA has not specified the type or frequency of services it expects home oxygen suppliers to provide. In contrast, VA encourages its medical centers to contract with suppliers that are accredited by JCAHO or comply with its standards. Even though VA’s reimbursements are less generous than Medicare’s, VA patients received more frequent service visits than the Medicare patients whose records we reviewed. The Balanced Budget Act of 1997 includes provisions that will bring Medicare’s reimbursement rates more into line with the competitive marketplace rates paid by VA. Recommendations

We recommend that the Administrator of HCFA do the following: monitor trends in Medicare beneficiaries’ use of and access to stationary liquid oxygen systems and liquid and gas portables; monitor the availability and costs of new and evolving oxygen delivery systems, including lightweight portable systems and oxygen conserving devices, and work with the medical community to (1) evaluate the clinical benefits associated with the use of such equipment, (2) identify the patient populations most likely to benefit from the use of such equipment, and (3) educate prescribing physicians about existing options in oxygen delivery systems and their right to prescribe the system that best meets their patients’ needs; advise the Secretary of HHS whether a budget-neutral restructuring of the Medicare reimbursement system for home oxygen is needed to provide patient access to the more expensive home oxygen systems, and whether Medicare controls can be implemented to ensure that the use of such systems is limited to patients that can benefit from their use; and work with the medical community, the oxygen industry, patient advocacy groups, accreditation organizations, and VA officials to promptly finalize service standards for Medicare home oxygen suppliers. Basis for Comparison of Medicare and VA Reimbursement Rates

To evaluate the appropriateness of Medicare’s reimbursement rates for home oxygen, we considered comparing Medicare’s rates to those paid by Medicaid, private insurance companies, managed care plans, and the Department of Veterans Affairs (VA). VA central office policy encourages the medical centers to contract with a supplier that is either accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) or complies with its standards.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the appropriateness of Medicare's reimbursement rates for home oxygen, focusing on: (1) its comparison of Medicare and Department of Veterans' Affairs (VA) payment rates; (2) concerns about access to liquid oxygen systems and lightweight portable equipment for patients who are highly active; and (3) standards for the services associated with meeting patients' home oxygen needs.

What GAO Found

GAO noted that: (1) Medicare's fee schedule allowances for home oxygen exceeded GAO's adjusted estimate for the competitive marketplace rates paid by VA by almost 38 percent; (2) the rate reductions mandated by the Balanced Budget Act of 1997 will bring Medicare's fee schedule more into line with the competitive marketplace costs for home oxygen; (3) concerns have been raised that these reductions could reduce Medicare beneficiaries' access to portable units; (4) under Medicare's modality-neutral payment system, home-based liquid oxygen systems, which patients can use to refill portable units, do not offer suppliers the attractive profit margins associated with lower-cost oxygen concentrators; (5) lightweight, less cumbersome portable systems, which may increase patient mobility, are more expensive than traditional portable gas cylinders; (6) GAO's analysis shows that VA patients were receiving more portable units and refills than Medicare patients were, even though VA's payment rate, adjusted for comparability, was lower than Medicare's; (7) the upcoming reductions in Medicare allowances may lead some suppliers to provide Medicare patients with the least costly systems available, regardless of their patients' needs; (8) the Department of Health and Human Services (HHS) could use its authority under the recently enacted legislation to establish separate reimbursement rates for oxygen concentrators, liquid systems, regular portable units, and lightweight portable units, as long as the impact on overall Medicare costs is budget neutral; (9) the evolution in technology and costs of oxygen delivery systems--and the clinical indications for initiating and terminating the use of more expensive, lightweight portable units--warrant further examination by HHS and the Health Care Financing Administration (HCFA) before deciding whether Medicare's reimbursement system should be restructured; (10) HCFA has not established standards to ensure that home oxygen suppliers provide Medicare patients even basic support services; (11) oxygen suppliers who serve Medicare patients need only comply with basic registration and business requirements associated with obtaining a Medicare supplier number; (12) in contrast, VA encourages its medical centers to contract with suppliers who are accredited by the Joint Commission on Accreditation of Healthcare Organizations or comply with its standards; (13) VA patients typically received more frequent service visits than Medicare patients; and (14) the Balanced Budget Act requires HHS to establish service standards for Medicare home oxygen suppliers.