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Audit (A-07-12-05024)

12-30-2013
Medicare Payments for Vacuum Erection Systems Are More Than Twice as Much as the Amounts Paid for the Same or Similar Devices by Non-Medicare Payers

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Summary

Medicare payment amounts for vacuum erection systems (VES) remain grossly excessive compared with the amounts that non-Medicare payers pay. Medicare currently pays suppliers more than twice as much for VES as the Department of Veterans Affairs and consumers over the Internet pay for these types of devices.

Processes exist to remedy this imbalance by adjusting Medicare payment rates for VES. Use of the inherent reasonableness process would achieve cost savings. If the Medicare fee schedule amount for VES had been adjusted to approximate the amount paid for the same or similar devices by non-Medicare payers, the Federal Government would have saved an average of approximately $14.4 million for each of the 6 years reviewed, and Medicare beneficiaries would have saved approximately $3.6 million annually. We are unable to calculate precise cost savings that would be achieved through application of the Competitive Bidding Program to VES. However, the Centers for Medicare & Medicaid Services (CMS) recently announced that the latest round of competitive bidding will reduce prices by 45 percent for certain types of durable medical equipment, prosthetics, orthotics, and supplies and by 72 percent for mail-order diabetic testing supplies nationwide.

Further, we estimate that if claim levels remain the same in future years as they were on average for calendar years 2009 through 2011, the potential annual savings to the Federal Government and Medicare beneficiaries through adjusted VES payment rates would be approximately $18 million and $4.5 million, respectively.

We recommended that CMS either (1) use its authority under the inherent reasonableness regulations to determine whether the payments for VES are grossly excessive and, if so, establish a special payment limit or (2) seek legislative authority to include VES in the Competitive Bidding Program and then implement a National Mail-Order Competitive Bidding Program for VES. CMS concurred with both of our recommendations.

Copies can also be obtained by contacting the Office of Public Affairs at Public.Affairs@oig.hhs.gov.

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