State Medicaid Agencies Can Significantly Reduce Medicaid Costs for Durable Medical Equipment and Supplies

In our previous audits of four State Medicaid agencies, we found that the States could have achieved savings of approximately $18.1 million on the purchase of selected durable medical equipment (DME) items had they obtained pricing comparable to pricing under Round 1 of Medicare's Competitive Bidding Program. Since issuing the previous audit reports, we identified $12 million in additional cost savings for the selected DME items that the four States could have obtained by using pricing comparable to Medicare's Round 2 Competitive Bidding and National Mail-Order Programs.

We found that Medicaid provider reimbursement rates for selected DME items varied significantly among the States that we reviewed. We determined that opportunities exist for these States to lower provider reimbursement rates, resulting in approximately $30.1 million in potential cost savings for the States and the Federal Government. We did not determine the cost of implementing a rebate or competitive bidding program in each State.

We recommended that CMS (1) seek legislative authority to limit State Medicaid DME reimbursement rates to Medicare program rates and (2) encourage further reduction of Medicaid reimbursement rates through competitive bidding or manufacturer rebates. CMS concurred with our recommendations.