Durable Medical Equipment: Regional Carriers' Coverage Criteria Are
Consistent with Medicare Law (Letter Report, 09/19/95, GAO/HEHS-95-185).

In November 1993, the Health Care Financing Administration began
consolidating the work of processing and paying claims for durable
medical equipment, prostheses, orthoses, and supplies at four regional
carriers.  Claims for such items had previously been processed and paid
by local Medicare carriers. As part of the transition to regional
processing, the four regional carriers developed coverage criteria for
the items. GAO found that the final criteria adopted by the regional
carriers are consistent will Medicare's national coverage policies and
the law. GAO does not believe that the criteria have impeded disabled
beneficiaries access to needed durable medical equipment and other
items. Also, in 1994 the regional carriers approved a similar percentage
of service for durable medical equipment and other items for disabled
and aged and aged Medicare beneficiaries, so there was no significant
difference in access to durable medical equipment and other items
between the two groups of beneficiaries.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-185
     TITLE:  Durable Medical Equipment: Regional Carriers' Coverage 
             Criteria Are Consistent with Medicare Law
      DATE:  09/19/95
   SUBJECT:  Medical equipment
             Medical supplies
             Beneficiaries
             Medical expense claims
             Prosthetic devices
             Disability insurance
             Handicapped persons
             Compliance
             Claims settlement
IDENTIFIER:  Medicare Program
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to Congressional Requesters

September 1995

DURABLE MEDICAL EQUIPMENT -
REGIONAL CARRIERS' COVERAGE
CRITERIA ARE CONSISTENT WITH
MEDICARE LAW

GAO/HEHS-95-185

DMEPOS for Medicare Beneficiaries

(106417)


Abbreviations
=============================================================== ABBREV

  DMEPOS - durable medical equipment, prostheses, orthoses, and
     supplies
  HCFA - Health Care Financing Administration

Letter
=============================================================== LETTER


B-258071

September 19, 1995

The Honorable William V.  Roth, Jr.
Chairman
The Honorable Daniel P.  Moynihan
Ranking Minority Member
Committee on Finance
United States Senate

The Honorable Bill Archer
Chairman
The Honorable Sam M.  Gibbons
Ranking Minority Member
Committee on Ways and Means
House of Representatives

The Honorable Thomas Bliley, Jr.
Chairman
The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

In November 1993, the Health Care Financing Administration (HCFA)
began consolidating the work of processing and paying claims for
durable medical equipment, prostheses, orthoses, and supplies
(DMEPOS) at four regional carriers.  Before November 1993, claims for
such items were processed and paid by local Medicare carriers.  The
local carriers generally serve a state and they continue to process
and pay most other Medicare part B claims. 

As part of the transition to regional processing, the four regional
carriers developed coverage criteria for DMEPOS.  Certain groups
representing disabled Medicare beneficiaries were concerned that
these criteria and their implementation by regional carriers would
prevent disabled persons from receiving needed DMEPOS. 

In 1993, the Medicare population was about 36 million persons; about
90 percent of those were eligible for Medicare benefits because of
age (65 years old and older) and the remaining 10 percent were
eligible because of disability.\1 In 1993, Medicare paid about $2.7
billion for DMEPOS (including oxygen services and supplies). 

Your committees asked us to study whether the regional carriers'
coverage criteria have adversely affected disabled beneficiaries'
access to customized DMEPOS.  In response to that request, we
reviewed (1) national Medicare requirements and the regional
carriers' coverage criteria and (2) how the criteria have been
applied to claims.  Specifically, we reviewed the four regional
carriers' DMEPOS coverage criteria, including those for customized
items, and compared them with Medicare's national coverage criteria
and the requirements of Medicare law.  We also compared the local
carriers' coverage criteria for wheelchairs, prostheses, and orthoses
from nine states with the criteria developed by the regional
carriers.  To determine if the criteria are being applied
consistently, we compared the percentages of DMEPOS claims approved
by local and regional carriers for aged and disabled beneficiaries. 
For additional details on our objective, scope, and methodology, see
appendix I. 


--------------------
\1 Disabled persons, regardless of age, qualify for Medicare coverage
after being entitled to Social Security disability benefits for 24
months. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The final criteria adopted by the regional carriers are consistent in
all material respects with Medicare's national coverage criteria and
Medicare law.  We do not believe that the regional carriers' criteria
have impeded disabled beneficiaries' access to customized DMEPOS. 

In 1994, the regional carriers approved DMEPOS claims for disabled
Medicare beneficiaries at a similar rate as for aged beneficiaries,
and there is no apparent difference in the application of the
criteria between disabled and aged Medicare beneficiaries.  Further,
from January 1992 through September 1994 the differences in approval
rates between aged and disabled beneficiaries narrowed. 

Some groups representing disabled persons have stated that the
disabled need items to accommodate a more active lifestyle than aged
beneficiaries.  HCFA has taken the position that Medicare law
restricts coverage to standard items unless the beneficiary's
physician prescribes and justifies lightweight materials or
customized items on medical grounds.  HCFA's position is consistent
with current law. 


   BACKGROUND
------------------------------------------------------------ Letter :2

DMEPOS include a variety of items.  Durable medical equipment
includes wheelchairs, walkers, canes, and oxygen systems.  Customized
wheelchairs are the most common kind of customized durable medical
equipment.  Prostheses are replacement body parts (such as artificial
limbs) and orthoses are braces.  Many of these items must also be
customized for the individual.  Supplies include disposable items,
such as wound dressings and catheters and associated tubing. 

In November 1991, HCFA (the agency within the Department of Health
and Human Services responsible for administering Medicare) announced
its intention to concentrate the responsibility for processing and
paying claims for DMEPOS at four regional carriers.  The transfer
from local to regional carriers began in November 1993 and was
completed in
July 1994.\2

In announcing the change to regional carriers, HCFA said that it
hoped to achieve greater consistency in coverage decisions for
DMEPOS.  HCFA expected that regional carriers would have sufficient
claims volume to employ experts on DMEPOS who would apply coverage
criteria more consistently than the local carriers.  In its
announcement, HCFA said that it had received complaints from
beneficiaries and suppliers that the local carriers were paying
incorrect amounts and were applying different interpretations of
coverage criteria to DMEPOS claims. 

In the spring of 1993, the four regional carriers published draft
medical review criteria for comment.  These criteria described the
conditions under which claims would be approved for payment.  Certain
groups representing Medicare beneficiaries expressed concern that the
regional criteria might be overly restrictive and disabled
beneficiaries might be denied access to needed DMEPOS. 


--------------------
\2 See appendix II for a list of the regional carriers and their
service areas. 


   REGIONAL CARRIERS' COVERAGE
   CRITERIA ARE CONSISTENT WITH
   NATIONAL CRITERIA AND LAW
------------------------------------------------------------ Letter :3

The final coverage criteria adopted by the regional carriers in
August 1993 are consistent with Medicare's existing national coverage
criteria and the law governing the Medicare program.  Moreover, the
criteria are more consistent across the regional carriers than the
criteria formerly used by local carriers. 

We compared the regional carriers' criteria with all existing
national Medicare criteria and those sections of the law that deal
with DMEPOS to assess conformity.  We found that the regional
carriers' criteria comply in all material respects with Medicare
criteria. 

As part of their process for drafting coverage criteria, in the
spring of 1993 the regional carriers furnished their draft DMEPOS
coverage criteria to suppliers, physicians, other health
professionals, and interest groups for their review and comment.  The
regional carriers revised and finalized their coverage criteria after
considering the comments received. 

Also, the regional carriers looked at the coverage criteria formerly
used by the local carriers when drafting their own criteria.  We
compared several local carriers' coverage criteria for wheelchairs,
prostheses, and orthoses with the regional criteria to see if the
regional criteria were more restrictive.  We reviewed the coverage
criteria of carriers serving nine states\3 and concluded that the
regional coverage criteria were not significantly more restrictive
than the local carriers' criteria in these states. 

We also found that the regional carriers' coverage criteria were more
consistent with one another than were the local carriers' criteria. 
This is illustrated by the criteria applicable to motorized
wheelchairs from the nine states we reviewed.  One local carrier's
criteria for motorized wheelchairs required an evaluation of the
patient's condition and a prescription by a specialist in physical
medicine, orthopedic surgery, neurology, or rheumatology, but the
other carriers did not require the prescribing physician to be of a
particular specialty.  In addition, some local carriers' criteria
required medical evidence that the beneficiary was bed- or
chair-confined and was unable to operate a manual wheelchair, but
other carriers required only that the beneficiary was unable to
operate a manual wheelchair. 

The four regional carriers' criteria adopted a blend of parts of the
local carriers' criteria and require that all the following
conditions be met for coverage of a motorized wheelchair: 

  without the wheelchair, the beneficiary would be bed- or
     chair-confined,

  the wheelchair must be medically necessary and the beneficiary must
     be unable to operate the wheelchair manually, and

  the beneficiary must be capable of safely operating the controls of
     the wheelchair. 

The regional carriers' criteria require that the documentation of
medical necessity be completed by a physician, but they do not
require that the physician be of a certain specialty. 


--------------------
\3 The nine states are identified in appendix II. 


      CONCERNS OF DISABLED
      INTEREST GROUPS
---------------------------------------------------------- Letter :3.1

Certain groups representing disabled beneficiaries stated that these
beneficiaries did not always get the DMEPOS items they desired.  The
groups said that the people they represent are generally younger and
more active than elderly Medicare beneficiaries and that many
disabled people hold jobs and like to engage in activities outside
the home, such as sports.  Some groups said that disabled
beneficiaries would like to have wheelchairs and prostheses made of
lightweight materials, which often cost substantially more than
standard items.  Another group said that some beneficiaries would
like to have more than one wheelchair, such as a standard one for use
around the home plus a power wheelchair to facilitate getting to and
from classes on a college campus or for shopping, or a lightweight
wheelchair for sports. 

HCFA's policy is that Medicare will only pay for standard items for
beneficiaries unless the beneficiary's physician prescribes and
justifies lightweight materials or customized items on medical
grounds.  Thus, Medicare will not pay for items that accommodate
active lifestyles, such as items manufactured of lightweight
materials or with custom features.  Also, Medicare will pay for one
wheelchair, but backup wheelchairs will be denied.  We believe that
these policies are consistent with current Medicare law. 

Although the regional criteria comply with Medicare's existing
national policies, some people may find that items approved by local
carriers in the past may no longer be approved and, conversely,
regional carriers may approve items that some local carriers had
denied.  In anticipation of such a development, HCFA established a
grandfather clause for current recipients of DMEPOS.  Thus, Medicare
beneficiaries who had items approved by their local carrier in the
past will remain eligible for reimbursement for those items from the
regional carrier; however, first-time claims will be reviewed using
the regional carriers' criteria. 


   IN 1994, REGIONAL CARRIERS
   APPROVED SIMILAR PERCENTAGES OF
   DMEPOS SERVICES FOR DISABLED
   AND AGED BENEFICIARIES
------------------------------------------------------------ Letter :4

To see if the regional carriers' criteria were affecting disabled and
aged beneficiaries differently, we obtained paid claims data covering
January 1992 through September 1994.  Disabled Medicare beneficiaries
had a similar but somewhat lower percentage of DMEPOS claims approved
for payment as did the aged during that period.  Further, the
difference in percentages generally narrowed by 1994, when regional
carriers processed claims. 

Table 1 shows the percentage of claims that carriers allowed by
region and nationwide.  For calendar years 1992 and 1993, the claims
were processed by local carriers, which we grouped into regions to
correspond with the regional carriers.  In 1994, claims were
processed by the regional carriers. 



                          Table 1
          
          Percentage of DMEPOS Claims Allowed for
            Aged and Disabled Beneficiaries, by
              Region and Nationwide (1992-94)


                    Disabl          Disabl          Disabl
Area          Aged      ed    Aged      ed    Aged      ed
----------  ------  ------  ------  ------  ------  ------
Region A        74      65      77      70      95      91
Region B        76      69      80      74      89      81
Region C        79      73      80      76      95      92
Region D        78      68      76      67      92      86
==========================================================
Nationwide      77      69      79      72      93      87
----------------------------------------------------------
Note:  See appendix III for the number of claims. 

We identified certain items frequently claimed by disabled
beneficiaries from 1992 to 1994.  The carriers allowed similar
percentages of claims for disabled and aged beneficiaries for these
items, with a narrowing of the differences between the groups by
1994, when claims were processed by regional carriers.  (See table
2.)



                          Table 2
          
            Percentage of Selected DMEPOS Items
               Allowed for Aged and Disabled
            Beneficiaries, Nationwide (1992-94)


                    Disabl          Disabl          Disabl
Item          Aged      ed    Aged      ed    Aged      ed
----------  ------  ------  ------  ------  ------  ------
Customized      50      57      52      61      47      46
 wheelchair
Lightweigh      79      74      82      78      96      96
 t
 wheelchai
 r
"Flex           85      79      88      86      98      97
 foot"
 prosthesi
 s
----------------------------------------------------------
Note:  See appendix III for the number of items. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

The coverage criteria adopted by the regional carriers are consistent
with Medicare's national coverage policies and law.  Also, in 1994
the regional carriers approved a similar percentage of DMEPOS
services for disabled and aged Medicare beneficiaries, so there was
no significant difference in access to DMEPOS services between
disabled and aged Medicare beneficiaries. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

The Department of Health and Human Services had no comments following
its review of this report. 


---------------------------------------------------------- Letter :6.1

We are sending copies of this report to the Secretary of Health and
Human Services and other interested parties.  We also will make
copies available to others upon request. 

If you have any questions about this report, please call me at (202)
512-7119.  Other major contributors to this report are listed in
appendix IV. 

Sarah F.  Jaggar
Director, Health Financing
 and Public Health Issues


OBJECTIVE, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

The objective of this assignment was to determine if Medicare
carriers' coverage criteria adversely affected disabled
beneficiaries' access to customized DMEPOS. 

To address this objective, we reviewed the four regional carriers'
DMEPOS coverage criteria, including those for customized items, and
assessed whether they complied with Medicare's established national
coverage criteria.  In addition, for nine states we reviewed the
local carriers' coverage criteria, as provided to the regional
carriers, relating to wheelchairs, prostheses, and orthoses.  The
states were selected to represent states with relatively high
Medicare populations and each of the four regions.  Also, we
interviewed HCFA officials, the medical director of one of the
regional carriers, four consumer groups representing disabled
persons, and two DMEPOS suppliers about whether regional carriers
were unreasonably restricting access to DMEPOS for disabled Medicare
beneficiaries. 

The statistical information in this report was developed from a
computerized database of paid DMEPOS claims for calendar years 1992
and 1993 and January through September 1994 that we obtained from
HCFA.  The 1994 data were the most current available at the time of
our request to HCFA.  We extracted records for 220 DMEPOS items for
which there were allowed charges in each year from 1992 to 1994.  The
total allowed charges for these 220 items represented about 91
percent of the total allowed charges for all DMEPOS items from 1992
through September 1994, excluding oxygen services.  Oxygen services
are relatively high-volume, high-dollar DMEPOS, but we excluded them
from our analysis because, while oxygen services are individualized,
they are not customized like wheelchairs, prostheses, or orthoses. 

Our work, which was conducted from October 1993 to July 1995, was
performed in accordance with generally accepted government auditing
standards. 


NAMES AND ADDRESSES OF REGIONAL
CARRIERS AND THEIR SERVICE AREAS
========================================================== Appendix II


      TRAVELERS INSURANCE CO. 
      WILKES-BARRE, PA
      (REGION A)
------------------------------------------------------ Appendix II:0.1

Connecticut
Delaware
Maine
Massachusetts
New Hampshire
New Jersey
New York\5
Pennsylvania\5
Rhode Island
Vermont


--------------------
\4 The Travelers changed its name to MetraHealth Insurance Company on
January 4, 1995. 

\5 One of the nine states studied in our review. 


      ADMINASTAR FEDERAL, INC. 
      INDIANAPOLIS, IN (REGION B)
------------------------------------------------------ Appendix II:0.2

District of Columbia
Illinois\5
Indiana
Maryland
Michigan\5
Minnesota
Ohio
Virginia
West Virginia
Wisconsin


      PALMETTO GOVERNMENT BENEFITS
      ADMINISTRATORS COLUMBIA, SC
      (REGION C)
------------------------------------------------------ Appendix II:0.3

Alabama
Arkansas
Colorado
Florida\5
Georgia
Kentucky
Louisiana
Mississippi
New Mexico
North Carolina
Oklahoma
Puerto Rico
South Carolina
Tennessee
Texas\5
Virgin Islands


      CONNECTICUT GENERAL LIFE
      INSURANCE CO.  (CIGNA)
      NASHVILLE, TN (REGION D)
------------------------------------------------------ Appendix II:0.4

Alaska
American Samoa
Arizona
California\5
Guam
Hawaii
Idaho
Iowa
Kansas
Mariana Islands
Missouri\5
Montana
Nebraska
Nevada
North Dakota
Oregon
South Dakota
Utah
Washington\5
Wyoming


--------------------
\5 One of the nine states studied in our review. 


DMEPOS SERVICES ALLOWED FOR AGED
AND DISABLED BENEFICIARIES
(1992-94)
========================================================= Appendix III



                        Table III.1
          
            DMEPOS Claims Allowed by Region and
                 Nationwide (in Thousands)


                    Disabl          Disabl          Disabl
Area          Aged      ed    Aged      ed    Aged      ed
----------  ------  ------  ------  ------  ------  ------
Region A     3,215     385   2,685     346   1,294     164
Region B     2,416     350   2,315     346   1,934     304
Region C     5,401     721   4,700     689   2,727     432
Region D     3,192     448   2,272     365   1,231     177
==========================================================
Nationwide  14,224   1,904  11,972   1,746   7,186   1,077
----------------------------------------------------------


                        Table III.2
          
             Selected DMEPOS Items, Nationwide


                    Disabl          Disabl          Disabl
Item          Aged      ed    Aged      ed    Aged      ed
----------  ------  ------  ------  ------  ------  ------
Customized   4,096   7,735   2,177   2,979     136     128
 wheelchair
Lightweigh  312,23  35,450  311,62  33,843  192,92  24,275
 t               1               8               4
 wheelchai
 r
"Flex          967     763     950     756     496     497
 foot"
 prosthesi
 s
----------------------------------------------------------

MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

Thomas Dowdal, Assistant Director, (202) 512-6588
Michael Piskai, Evaluator-in-Charge
Jerry Baugher
Mary Ellen Fleischman
Roger Hultgren