NCPA - National Center for Policy Analysis


September 24, 2008

Billions of taxpayer dollars may have been wasted over the last decade because the government-run health programs for the elderly and disabled paid out claims with blank or invalid diagnosis codes, says a new Senate report. 

Investigators reviewed millions of claims submitted by sellers of wheelchairs, drugs and other medical supplies on behalf of Medicare patients from 2001 to 2006 and found at least $1 billion in which the listed diagnosis code appeared to have little, if any, connection to the reimbursed medical item:

  • Medicare paid millions of dollars to medical suppliers for blood glucose test strips -- used exclusively for diabetics -- based on non-diabetic diagnoses.
  • 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."
  • Federal regulations require that Centers for Medicare and Medicaid Services (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.
  • Only 3 percent of claims are reviewed after payment is made.

CMS maintains that the information is incorrect and out of date, yet, when investigators raised questions as to whether the contractor responsible for indentifying potential waste and fraud was effectively carrying out its role, CMS changed contractors.

Furthermore, CMS now acknowledges 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, say investigators.

Source: Associated Press, "Probe: Medicare paid billions in suspect claims,", September 24, 2008.


Browse more articles on Health Issues