Crackdown planned on 'fraud' by Medicare equipment suppliers


WASHINGTON -- Federal health officials denounced "fraud and abuse" in billings by some medical suppliers and announced plans yesterday to tighten regulations on Medicare payments for such equipment as wheelchairs, oxygen and braces.

"Some suppliers simply charge outrageous prices, often many times more than the normal retail cost," said Dr. Louis W. Sullivan, secretary of health and human services. For example, a chest support harness for patients recovering from open-heart surgery cost less than $10 each to manufacture, but Medicare was billed $225 for one brace.

In an effort to get the maximum reimbursement from the government, some suppliers opened storefront offices in states where Medicare payment rates were higher or where rules governing claims processing were less strict, Dr. Sullivan said. The government contracts with 33 insurance companies to process claims, and reimbursements vary widely across the country.

One example, according to the Health Care Financing Administration, which oversees Medicare, is a knee, ankle and foot brace that varies in price from $375 to $1,600.

Another problem Medicare has faced is suppliers' driving the price up by billing for an item's components, Dr. Sullivan said. He gave as an example a disposable ostomy bag that, billed as a single item, costs Medicare $4.50. But some suppliers bill by its three component parts -- the pouch, seal and adhesive -- driving the cost up to $12.

Also, he said, some products "of questionable value" are aggressively marketed for high prices. For instance, transcutaneous electrical nerve stimulaters are sold to ease muscle and joint pain, "even though there is still much debate about their effectiveness," Dr. Sullivan said. Medicare payment for one such unit varies from $340 to $575, although the components could be purchased at an electronics store for about $50, he said.

"This fraudulent abuse of our citizens and our tax dollars is intolerable," he said. "We will aggressively seek out these offenders and stop their scams and other illegal practices."

Under new regulations proposed yesterday, after three years Medicare reimbursement would vary no more than 15 percent for a given piece of such medical equipment.

Also, in an effort to control claims, the 33 processing centers would be reduced to four.

Savings from new regulations were projected at $16 million in 1993-1994 and a total of $55 million from 1993 through 1997.

An additional legislative package reforming payment for "durable medical equipment" such as braces, oxygen and wheelchairs would save an estimated $80 million in 1993 and a total of $970 million from 1993 through 1997, health officials said.

To stop the practice of "shopping" the states for the highest Medicare payments, Dr. Sullivan said, claims will be paid according to where the beneficiary lives rather than the billing address given by the medical equipment supplier.

Dr. Sullivan said most suppliers are ethical, and he commended the National Association of Medical Equipment Suppliers for trying to curtail fraud and abuses.

But "with a clear intention to overcharge the taxpayers for medical devices, unscrupulous sellers have established a high-tech, modern medicine show," he said.

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