In 2015, $3.2 Billion Lost to Misbilling of Medicare Durable Medical Equipment Claims


CONTACT: Kristin Walter
(202) 898-0995


In 2015, $3.2 Billion Lost to Misbilling of  Medicare Durable Medical Equipment Claims  

Improper Billing Pushing the Program to Brink of Bankruptcy

Washington, D.C. – An analysis released today by the Council for Medicare Integrity (CMI) scrutinized Centers for Medicare and Medicaid Services (CMS) data pertaining to Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) claims, finding that the Medicare program was overbilled in 39.9 percent of cases and lost more than $3.2 billion to misbilling within this claim type in 2015 alone.

The Comprehensive Error Rate Testing Program (CERT) found that the most common error in DMEPOS billing, insufficient documentation, accounted for $2.6 billion of the total $3.2 billion in waste. This error was identified by the CERT contractor reviewers if they could not conclude that the billed services were actually provided, were provided at the level billed, and/or were medically necessary.

In addition, hospital beds/accessories were the DMEPOS service with the highest improper payment rate – misbilling in 85.3 percent of all claims. Claims for manual wheelchairs were overbilled in 81.3 percent of cases, and surgical dressing claims were overbilled in 72.5 percent of cases.

“It’s disturbing to learn that well more than a third of all DMEPOS claims are billed improperly,” said Kristin Walter, spokesperson for the Council for Medicare Integrity. “It’s equally disturbing to see that the number one reason for the high rate of billing errors is provider or supplier inability to appropriately document that services were actually provided or that they were medically necessary.”

Due to year-over-year concerns about high levels of misbilling among DMEPOS claims, in January 2014, CMS announced its plans to add a new Recovery Audit Contractor (RAC) program contract to provide increased oversight for this industry. A single, new national RAC will soon be chosen to conduct exclusive reviews of DMEPOS and Home Health and Hospice (HH&H) claims.

Since 2011, the overall rate of Medicare Fee For Service improper payments has risen steadily from 8.6 percent to 12.1 percent in 2015, which now equates to a loss of more than $40 billion annually from the Medicare Trust Funds.

Recently, both the Congressional Budget Office (CBO) and the Medicare Trustees released reports raising heightened concerns that the Medicare program will be insolvent before 2030, bringing greater attention to the need to reduce high levels of misbilling within the program.

In an effort to reduce waste within Medicare, the RAC Program was put in place by Congress in 2009 to review Medicare FFS post-payment claims to identify and recover improper payments made to providers. The program historically has reviewed just 2 percent of a provider’s Medicare claims. However, due to complaints of perceived audit burden by the hospital lobby, the rate of review of a provider’s post-payment claims was recently reduced to just 0.5 percent.

Kristin Walter said, “At this point, 99.5 percent of post-payment Medicare claims are not reviewed at all for billing accuracy. This is startling when you consider that within private insurance practices, companies reserve the right to audit up to 100 percent of their claims for billing accuracy and medical necessity. Providers are certainly comfortable submitting to that high a level of review to receive private insurance payments.”

When the RAC program was working at previous full-scale levels, Senator Claire McCaskill (D-MO), the Ranking Member on the U.S. Senate Special Committee on Aging, credited the RACs with returning $10 billion back to Medicare and extending its life by two years. This level of recovery needs to be reinstated in order to return higher levels of misspent funds back to the Medicare program and ensure these services will be there for future generations.

The data for the CMI analysis comes from the newly posted CERT Supplementary Appendices, which contain the data that will eventually become the agency’s official 2015 Comprehensive Error Rate Testing (CERT) report. The CERT program evaluates a statistically valid random sample of claims to determine if they were paid properly under Medicare coverage, coding, and billing rules.

For more information, please visit: www.medicareintegrity.org.

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About the Council for Medicare Integrity:
The Council for Medicare Integrity is a 501(c)(6) non-profit organization. The Council’s mission is to educate policymakers and other stakeholders regarding the importance of healthcare integrity programs that help Medicare identify and correct improper payments.

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