Effect of the Increased Application of the Comparability Provision on Payments by the Medicare Program and Its Beneficiaries

This final audit report summarizes the results of our analysis of the implementation of the Medicare Part B comparability provision and the impact comparability had on the adjusted historical payment base (AHPB) used to determine payment amounts under Medicare's Physician Fee Schedule (MPFS). The Medicare comparability provision provides that the reasonable charge for a service may not exceed the established charge for non-Medicare policy holders of a carrier for a comparable service under comparable circumstances. Our audit of 12 high-dollar volume procedures paid by Blue Shield carriers disclosed that the application of the comparability provision to the Medicare Part B reasonable charges would have saved the Medicare program and its beneficiaries $3.9 million for 1986 and $38.0 million for 1990. In a separate analysis of carrier responses to a 1990 HCFA survey for 30 selected procedures, the increased application of comparability would have reduced Medicare and beneficiaries' payments by $25.6 million. The potential payment reductions associated with the increased application of the comparability provision were significant. Therefore, we recommended that HCFA consider the savings identified in this report when updating the MPFS conversion factor as part of the Medicare volume performance standard rates of increase.