Audit of Medicaid Payments for Oxygen Related Durable Medical Equipment and Supplies, Minnesota Department of Human Services, St. Paul, Minnesota

Recent changes in the Medicare fee schedules, under the Balanced Budget Act of 1997, substantially reduced the payment levels for numerous Medicare items.  Minnesota's Medicaid State Plan generally provided that medical supplies and equipment should be paid at the Medicare fee schedule amount. We reviewed 125,021 paid claims (totaling $3,100,615) for oxygen related DME and supplies provided to Medicaid recipients during our audit period.  We determined that Medicaid reimbursements for several oxygen related items exceeded the associated amounts allowable under the Medicare payment limits but amounted to only about $2,200 in Medicaid overpayments.  To the State's credit, these minor overpayments were offset by substantial savings attained by using competitive bidding for oxygen related DME equipment and supplies.  The State has achieved significant savings (millions of dollars) by obtaining competitive bids and setting the Medicaid allowable rates for oxygen related DME at amounts much less than the Medicare allowable rates.