Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
CHIROPRACTIC CARE 
Controls Used by Medicare, Medicaid, and 
Other Payers 
JUNE GIBBS BROWN 
Inspector General 
SEPTEMBER 1998 
OEI-04-97-00490  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 
Regional Inspector General and Christopher Koehler, Deputy Regional Inspector General. 
Principal OEI staff included: 
REGION  HEADQUARTERS 
Dwayne Grant, Program Analyst
 Alan Levine, Program Specialist

Greg Jones, Program Analyst
 Brian Ritchie, Technical Support Analyst

Graham D. Rawsthorn, Program Analyst
 Barbara Tedesco, Statistician

Betty Apt, Team Leader

To obtain copies of this report, please call the Atlanta Regional Office at (404) 562-7723. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E  S U M M A R Y

PURPOSE 
To describe how Medicare, Medicaid, and private insurers control chiropractic benefits. 
BACKGROUND 
The Balanced Budget Act of 1997 required the Health Care Financing Administration (HCFA) 
establish new utilization guidelines for Medicare chiropractic care by January 1, 2000.  It also 
eliminated the X-ray requirement.  In addition, New York recently enacted legislation requiring 
private insurers to include chiropractic coverage in their benefits packages. 
We initiated two inspections to better understand the impact of these changes on the Medicare 
and Medicaid programs and to learn more about utilization controls.  This report, 
"CHIROPRACTIC CARE: Controls Used by Medicare, Medicaid, and Other Payers, (OEI-04-
97-00490)" describes Medicare, Medicaid, and private insurers' mechanisms for controlling 
expenditures and protecting the chiropractic benefit from potential waste and abuse.  A 
companion report, "CHIROPRACTIC CARE: Medicaid Coverage, (OEI-06-97-00480)" 
describes current and expected chiropractic care benefits under State Medicaid programs. 
Medicare, Medicaid, and private insurers do not consider control of chiropractic benefits a high 
priority or an area of major concern.  All commented that more could be done to control 
utilization of the benefit but that resources are better spent controlling other more costly benefits. 
FINDINGS 
We found that Medicare, Medicaid, and private insurers rely on utilization caps, X-rays, physician 
referrals, co-payments, and post and prepayment reviews, in varying degrees, to control utilization 
of chiropractic benefits.  Utilization caps are the most widely used, but these and other controls 
did not detect or prevent unauthorized Medicare maintenance treatments. 
Utilization Caps Are the Most Widely Used Control Mechanisms 
Ninety-five percent of Medicare and 46 percent of Medicaid programs use soft caps that can be 
exceeded with appropriate justification.  Hard caps, which cannot be exceeded, are used by 50 
percent of Medicaid programs and 94 percent of private insurers.  Federal costs for Medicaid 
chiropractic benefits can exceed those for Medicare because Medicaid utilization caps are 
typically higher than those for Medicare. 
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i  X-rays Provide Little Control of Chiropractic Benefits 
Few private insurers or Medicaid agencies require X-rays to document treatment necessity. 
Medicare currently requires X-rays; however, elimination of the X-ray requirement should have 
little impact on chiropractic controls since most contractors do not use X-rays as a control 
mechanism. 
Physician Referral Is Commonly Used as a Control Mechanism for Managed Care, but Not 
for Fee-For-Service Plans 
Sixty-eight percent of Medicaid and 66 percent of private managed care organizations used 
physician referrals to help control chiropractic utilization.  However, only 8 percent of Medicaid 
and 9 percent of private fee-for-service plans required physician referrals.  None of the Medicare 
fee-for-service plans required physician referrals. 
Co-payments, Coinsurance, and Deductibles are Used to Help Control Chiropractic Benefits 
by Medicare and Private Insurers, but Not by Medicaid 
Private insurers co-payments ranged from $5 to $15 while Medicare coinsurance equaled 20 
percent of approved charges.  Both private insurers and Medicare used annual deductibles. 
Private insurers deductibles ranged from $200 to $500 and Medicares deductible equaled $100. 
Prepayment Reviews Do Not Control Chiropractic Benefits 
Medicare and Medicaid contractors typically do prepayment reviews, however, it is basically a 
forms verification process.  For those claims that exceed the soft caps, Medicare and Medicaid 
medical necessity prepayment reviews are mostly paper audits. 
Post Payment Reviews are Used by Medicaid, but Not by Medicare, to Help Control 
Chiropractic Benefits 
Sixty-five percent of Medicaid contractors use post payment reviews to help control chiropractic 
utilization.  Medicare contractors, however, rarely conduct post payment reviews of chiropractic 
claims. 
Unauthorized Chiropractic Maintenance Treatments are Not Detected and Prevented 
HCFA policies preclude Medicare reimbursements for chiropractic maintenance treatments. 
However, only 40 percent of Medicare respondents claimed to do utilization reviews to identify 
and prevent such treatments.  Our analysis identified over $68 million in probable chiropractic 
maintenance treatments in 1996.  If left unchecked, this could result in as much as $447 million in 
improper Medicare payments from 1998 through 2002. 
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ii  RECOMMENDATIONS 
This report describes controls used by Medicare, Medicaid, and other payers for chiropractic 
benefits.  Utilization caps were the most widely used control mechanism.  Needless to say, their 
intent is to limit the quantity of services.  However, neither the utilization caps, nor any of the 
other controls, detected and prevented reimbursements for unauthorized Medicare chiropractic 
maintenance treatments. 
Accordingly, we recommend that HCFA develop system edits to detect and prevent unauthorized 
payments for chiropractic maintenance treatments.  HCFA may do so by: 
!	 requiring chiropractic physicians to use modifiers to distinguish the categories of the spinal 
joint problems (i.e. acute, exacerbation, recurrence, and chronic), and 
!	 requiring all Medicare contractors to implement system utilization frequency edits to 
identify beneficiaries receiving consecutive months of minimal therapy. 
COMMENTS 
The HCFA Administrator, the Assistant Secretary for Planning and Evaluation (ASPE), and the 
Assistant Secretary for Management and Budget (ASMB) commented on our report.  The full 
text of their comments are in appendix C. 
The HCFA concurred with our recommendations.  The Balanced Budget Act of 1997 required 
HCFA to develop utilization guidelines for chiropractic care.  In developing such guidelines, 
HCFA will develop modifiers to distinguish categories of spinal joint problems, and utilization 
frequency edits as we recommended. 
ASPE agreed that edits to identify inappropriate billings seemed desirable.  However, ASPE 
commented that our use of averages, on pages four through six, to summarize the range of 
utilization caps was inappropriate because they did not reflect real practice.  Our report 
provides the reader both the average utilization caps and the actual utilization caps for all 
Medicare and Medicaid respondents. 
Further, ASPE suggested that more information is needed to substantiate two State Medicaid 
Administrators claims that physician referrals are effective controls for chiropractic services. 
Specifically, ASPE wanted to know how these States measured effectiveness.  Additionally, 
ASPE noted that it would be helpful to know how the use of chiropractic services is distributed 
between managed care and fee-for-service providers.  These questions were not part of the scope 
of this study.  However, we plan to continue our analysis of chiropractic services and utilization in 
the future.  These and other questions are likely topics for inclusion in future analysis. 
ASMB expressed serious concerns about the methodology we used to estimate payments for 
probable inappropriate chiropractic maintenance treatments.  Specifically, ASMB was concerned 
about our use of a 10 percent estimate to represent the Medicare population who received 
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iii  chiropractic care for chronic conditions.  The 10 percent estimate, furnished by the American 
Chiropractic Association, is a universal percentage estimate of the population at large. 
Demographic data and specific analysis is not available to differentiate between the Medicare 
population and the population at large.  However, we contacted several Medicare Carrier Medical 
Directors who stated, based on their reviews of Medicare chiropractic claims, that the 10 percent 
appeared to be a reasonable estimate for the Medicare population. 
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iv  T A B L E  O F  C O N T E N T S

PAGE

EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Utilization Caps  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

X-rays  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Physician Referral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Co-payments, Coinsurance, and Deductibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Prepayment Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Post Payment Reviews  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Maintenance Treatments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

APPENDICES 
Scope and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Probable Maintenance Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
 I N T R O D U C T I O N

PURPOSE 
To describe how Medicare, Medicaid, and private insurers control chiropractic benefits. 
BACKGROUND 
Chiropractic Treatment 
Chiropractic treatment is becoming more commonplace with consumers, and gaining wider 
acceptance in the medical profession.  Chiropractors treat neuromusculoskeletal disorders and 
related functional clinical conditions including, but not limited to, back pain, neck pain and 
headaches.  Chiropractic care is most commonly sought for treatment of back pain.  Back pain is 
one of the most common and costly problems affecting adults.  An estimated 50 percent of adults 
experience back pain each year and almost 20 percent have frequent back pain. 
A common chiropractic treatment for low back pain is spinal manipulation.  Chiropractors use 
either their hands or hand held devices to perform manual spinal manipulations.  Manual 
manipulations are most commonly performed to correct a subluxation of the spine.  According to 
chiropractic theory, a subluxation is an incomplete dislocation, off centering, misalignment, 
fixation or abnormal spacing of vertebrae or intervertebral units.  The Department of Health and 
Human Services, Agency for Health Care Policy and Research, has documented spinal 
manipulation to be a recommendable method of symptom control for low back pain in adults.1 
Growth in Number of Chiropractors 
The chiropractic profession is licensed in all States and the District of Columbia.  All licensed 
chiropractors are entitled by law to use either the title doctor of chiropractic or chiropractic 
physician.  Approximately 55,000 chiropractors actively practice today, while less than 14,000 
existed in 1970, according to the U.S. Census.  The number of chiropractors has outgrown the 
U.S. population by three-fold.  In 1970, almost seven chiropractors practiced per 100,000 U.S. 
residents.  By 1997, this had increased to over 20 chiropractors per 100,000 residents. 
Medicare Chiropractic Eligibility 
In 1965, title XVIII of the Social Security Act created Medicare to provide health insurance for 
people 65 and over, people who are disabled, and persons with permanent kidney failure. 
Medicare has two parts: Hospital Insurance (Part A) and Medical Insurance (Part B).  In 1972, 
Section 273 of the Social Security Amendment (P.L. 92-603) expanded the definition of physician 
under Part B of Medicare to include chiropractors.  This made chiropractors eligible to participate 
1 Agency for Health Care Policy and Research, Pub No. 95-0642, December 1994, Acute Low Back 
Problems in Adults 
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1  in the Medicare program.  However, the only Medicare reimbursable chiropractic treatment is 
manual manipulation of the spine to correct a subluxation demonstrated by X-ray. 
Medicaid Chiropractic Eligibility 
In 1965, title XIX of the Social Security Act created Medicaid as a program to provide medical 
assistance for certain individuals and families with low incomes and resources.  This program is 
jointly funded by the Federal and State governments.  Within broad Federal guidelines each State 
(1) establishes its own eligibility standards, (2) sets the type, amount, duration, and scope of 
services, (3) establishes rate of payment for services, and (4) administers the program. 
In 1972, when chiropractors were recognized as physicians and became eligible to participate in 
Medicare, chiropractors also became eligible to participate in Medicaid.  Under Medicaid, 
however, chiropractic services are not a mandatory benefit, but rather an optional service. 
Therefore, it is within each States discretion whether to include chiropractic services in their 
Medicaid program.  If offered, each State also establishes its own levels of services.  However, 
according to Federal policy for Medicaid, chiropractic services should be limited to manual 
manipulation of the spine and X-ray services.  Currently, 30 State Medicaid fee-for-service 
programs offer chiropractic services. 
Private Insurers Chiropractic Benefits 
Many private insurers now offer chiropractic benefits.  The scope of chiropractic services are 
consumer driven.  We found insurance plans ranging from no chiropractic coverage to substantial 
chiropractic coverage.  Several insurers stated that they view the chiropractic benefit as a service 
they must provide to remain competitive.  Moreover, they expect users of chiropractic services to 
max-out the benefit each year. 
Chiropractic Controls 
The Balanced Budget Act of 1997 required the Health Care Financing Administration (HCFA) 
establish new utilization guidelines for Medicare chiropractic care by January 1, 2000.  It also 
eliminated the X-ray requirement.  In addition, New York recently enacted legislation requiring 
private insurers to include chiropractic coverage in their benefits packages. 
We initiated two inspections to better understand the impact of these changes on the Medicare 
and Medicaid programs and to learn more about utilization controls.  This report, 
"CHIROPRACTIC CARE: Controls Used by Medicare, Medicaid, and Other Payers, (OEI-04-
97-00490)" describes Medicare, Medicaid, and private insurers' mechanisms for controlling 
expenditures and protecting the chiropractic benefit from potential waste and abuse.  A 
companion report, "CHIROPRACTIC CARE: Medicaid Coverage, (OEI-06-97-00480)" 
describes current and expected chiropractic care benefits under State Medicaid programs. 
Medicare, Medicaid, and private insurers all use a variety of mechanisms to help control their 
chiropractic benefit.  However, most did not consider control of this benefit a high priority or an 
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2  area of major concern.  In fact, over 50 percent of Medicare and 60 percent of Medicaid 
respondents considered the chiropractic benefit to be a small part of their overall programs.  Both 
Medicare contractors and State Medicaid agencies commented that more could be done to control 
utilization of the chiropractic benefit, but that resources are currently better spent controlling 
other more costly benefits.  Also, private insurers were not concerned with controlling utilization, 
but it was because of their strict utilization caps rather than the size of the benefit. 
SCOPE AND METHODOLOGY 
We surveyed Medicare contractors, Medicaid agencies, and private insurers.  More specifically, 
we surveyed: 
!  all Medicare fee-for-service Part B contractors, 
!	 the 10 largest, by number of enrollees, Medicare managed care organizations from 10 
different States, 
!	 all 50 State Medicaid agencies, and the District of Columbia (each were sent a two-part 
survey - one for their fee-for-service contractors and one for their largest, by number of 
enrollees, managed care organizations), and 
!	 twenty private insurers (10 judgmentally selected Federal employee health benefit plans, 
and benefit managers for the 10 largest, by number of employees, private sector 
companies). 
In instances where respondents did not answer every survey question, our percentages are based 
on the number who responded. 
In addition to the surveys, we did on-site evaluations of one Medicare fee-for-service contractor, 
one Medicare managed care organization, two Medicaid fee-for-service contractors, and three 
Medicaid managed care organizations.  Moreover, we interviewed officials with the Indiana 
Chiropractic Association, the American Chiropractic Association, and the Carrier Medical 
Director Chiropractic Clinical Workgroup. 
Finally, we used a 1 percent sample of HCFAs 1996 National Claims History data to determine if 
Medicare contractors paid claims in accordance with HCFA policies, and to quantify the extent of 
chiropractic utilization.  Appendix A further details our scope and methodology. 
- - - -
We conducted our inspection between October 1997 and December 1997.  We conducted this 
inspection in accordance with Quality Standards for Inspections issued by the Presidents Council 
on Integrity and Efficiency. 
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3  FINDINGS

We found that Medicare, Medicaid, and private insurers use a variety of techniques to control 
utilization of chiropractic benefits.  Allowable chiropractic benefits vary in both quantity and type 
of treatments.  Along with varying benefits come varying controls.  Typical controls include 
utilization caps, X-rays, physician referrals, co-payments, and post and prepayment reviews. 
Utilization caps are the most widely used, but these and other controls did not detect or prevent 
unauthorized Medicare maintenance treatments. 
UTILIZATION CAPS ARE THE MOST WIDELY USED CONTROL MECHANISMS 
Limiting the number of visits by establishing utilization caps was the most widely used control 
mechanism reported by all groups surveyed.  A companion report on chiropractic benefits for 
Medicaid beneficiaries discusses benefits, treatment limits, and exceptions in detail (Chiropractic 
Care: Medicaid Coverage, OEI-06-97-00480). 
Utilization caps are most commonly broken down into two separate types - soft caps and hard 
caps. 
Soft caps are established service limits that can be exceeded with appropriate justification.  For 
example, one such justification would be documentation that a beneficiary has aggravated an 
existing condition. 
Hard caps, as the name implies, are concrete service limits or dollar amounts that cannot be 
exceeded for any reason within a specified time frame. 
Table 1 shows the average soft and hard utilization caps for respondents included in our survey. 
TABLE 1 
AVERAGE SOFT AND HARD UTILIZATION CAPS 
MEDICARE  MEDICAID  PRIVATE 
SOFT CAPS  21  28  N/A 
HARD CAPS  N/A  104  27 
Ninety-five Percent of Medicare and 46 Percent of Medicaid Programs Use Soft Caps 
Ninety-five percent (52 of 55) of all Medicare survey respondents said they use soft caps.  The 
soft caps ranged from 11 to 52 treatments per year, with 12 treatments being the most common. 
On average, the Medicare respondents used a soft cap of 21 treatments.  Table 2 shows 
chiropractic soft caps used by the Medicare respondents included in our survey. 
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4  TABLE 2 
MEDICARE CHIROPRACTIC SOFT CAPS 
TREATMENTS PER YEAR 
# Treatments  11  12  18  22  24  28  29  30  40  46  48  51  52 
Respondents  1  29  3  1  4  3  1  1  2  1  2  1  3 
HCFA requires all Medicare contractors to establish soft caps.  Each contractor, however, 
determines the level of the cap (i.e. the number of treatments).  HCFA further requires all 
Medicare contractors to evaluate the effectiveness of their caps on a quarterly basis.  Based on 
these evaluations, HCFA granted 5 percent (3 of 55) of its contractors permission to deactivate 
their chiropractic caps.  The three contractors documented that their soft caps were not cost 
effective.  Instead, they now focus on post payment reviews to identify aberrant providers. 
Forty-six percent (12 of 26) of States that provide chiropractic benefits reported using soft caps. 
The soft caps ranged from 1 to 80 treatments per year, with the average being 28 treatments. 
Table 3 shows chiropractic soft cap limits used by State Medicaid Agencies. 
TABLE 3 
MEDICAID CHIROPRACTIC SOFT CAPS 
TREATMENTS PER YEAR 
# Treatments  1  6  10  12  18  20  24  30  48  60  80 
Respondents  1  1  1  1  1  1  2  1  1  1  1 
Fifty Percent of Medicaid Programs and 94 Percent of Private Insurers Use Hard Caps 
Half (13 of 26) of the States that provide chiropractic benefits reported using hard caps to control 
their Medicaid chiropractic benefits.  The hard caps ranged from 12 to 365 treatments per year. 
The average hard cap is 104 treatments, however, this includes three States that allow one 
treatment per day.  Excluding these three States, the average Medicaid hard cap is 29 treatments. 
Table 4 shows the chiropractic hard caps used by State Medicaid agencies. 
TABLE 4 
MEDICAID CHIROPRACTIC HARD CAPS 
TREATMENTS PER YEAR 
# Treatments  12  18  20  24  25  50  56  365 
Respondents  2  1  1  3  1  1  1  3 
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5  Ninety-four percent (16 of 17) of private insurers relied on hard caps to control benefit utilization. 
The 16 private insurers used 11 utilization caps and 5 financial caps.  The utilization caps ranged 
from 12 to 60 treatments per year, with the average being 27 treatments.  Table 5 shows the 
chiropractic utilization hard caps used by private insurers. 
TABLE 5 
PRIVATE CHIROPRACTIC UTILIZATION HARD CAPS 
TREATMENTS PER YEAR 
# Treatments  12  20  24  25  26  30  40  60 
Respondents  2  2  1  1  1  2  1  1 
The financial caps, used by private insurers, ranged from $225 to $2,000 per year, with the 
average being $1,035.  Table 6 shows the chiropractic financial hard caps used by private insurers. 
TABLE 6 
PRIVATE CHIROPRACTIC FINANCIAL HARD CAPS 
TREATMENTS PER YEAR 
$ Cap  $225  $250  $700  $2000 
Respondents  1  1  1  2 
Federal Costs for Medicaid Chiropractic Benefits Can Exceed That for Medicare 
Twenty-six States offer Medicaid chiropractic benefits.  However, we limited our comparative 
analysis of Medicaid and Medicare Federal costs for chiropractic benefits to 24 States.  We did so 
because one State did not have a Medicaid utilization cap and the Medicare contractor in another 
State did not have a utilization cap. 
The Federal reimbursement rates and cost per treatment rates for Medicaid chiropractic 
treatments are typically lower than they are for Medicare.  Medicaid Federal matching 
reimbursement rates for the 24 States ranges from 50 percent to over 73 percent with 60 percent 
being the average.  This is lower than Medicare, where Federal costs are 80 percent of allowed 
charges.  Likewise, the average Federal cost for Medicaid manual manipulations of the spine is 
only $8.92, but for Medicare the average Federal cost is $18.92. 
However, overall Medicaid Federal costs for chiropractic services can exceed the cost for such 
services paid for by Medicare.  This is because Medicaids utilization caps are significantly higher 
than Medicares.  Sixty-seven percent (16 of 24) of States offering chiropractic care through their 
Medicaid fee-for-service programs have higher utilization caps than Medicare.  In one State, for 
example, the Medicare utilization cap is 12 treatments per year while the Medicaid utilization cap 
is 50 treatments. 
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6  Medicaids average utilization cap for the 24 States is 71 treatments per year, whereas Medicares 
average utilization cap is only 19 treatments per year.  Federal costs, at the maximum utilization 
cap for Medicaid chiropractic benefits, average $554 per person, whereas in Medicare it is only 
$365 per person. 
X-RAYS PROVIDE LITTLE CONTROL OF CHIROPRACTIC BENEFITS 
Few Medicaid Agencies and Private Insurers Require X-rays to Document Treatment 
Necessity 
Thirty-one percent (8 of 26) of Medicaid programs require X-rays.  However, 58 percent (15 of 
26) of Medicaid programs will reimburse chiropractors for X-rays. 
Only 12 percent (2 of 17) of private insurers require X-rays to ensure appropriateness of 
chiropractic claims. 
Elimination of the X-ray Requirement Should Have Little Impact on Chiropractic Controls 
since Most Medicare Contractors Do Not Use X-rays as a Control Mechanism 
Seventy-eight percent (43 of 55) of Medicare respondents claimed X-rays were not essential for 
ensuring the appropriateness of chiropractic claims.  They said chiropractic benefit control would 
not be affected by the Balanced Budget Act of 1997, which eliminates the X-ray requirement by 
the year 2000.  Several respondents commented that they do not use X-rays, but rather they 
compare diagnosis with treatment plans to determine appropriateness of treatments. 
The remaining 22 percent (12 of 55) said elimination of the X-ray requirement would impact their 
ability to verify spinal subluxations. 
PHYSICIAN REFERRAL IS COMMONLY USED AS A CONTROL MECHANISM FOR 
MANAGED CARE, BUT NOT FOR FEE-FOR-SERVICE PLANS 
Physician Referral Is Common for Managed Care Plans 
In 68 percent (15 of 22) of Medicaid managed care organizations and 66 percent (4 of 6) of 
private managed care organizations, physician referrals are required to obtain chiropractic care. 
According to the American Chiropractic Association, this common managed care gatekeeper 
practice restricts access to chiropractic care. 
Private insurers typically use physician referrals in conjunction with hard caps to control 
chiropractic utilization.  Only one private insurer used physician referrals as its only control 
mechanism. 
Few Fee-For-Service Programs Require Physician Referral 
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7  Overwhelmingly, Medicare, Medicaid, and private insurers allow direct access to chiropractors 
without a physician referral.  No Medicare fee-for-service program required physician referral for 
access to chiropractors. 
Only 8 percent (2 of 26) of Medicaid fee-for-service programs require physician referrals to 
access chiropractic services.  The two Medicaid programs that do require physician referrals, 
however, said physician referral is a very effective control mechanism.  It allows primary care 
physicians to monitor and coordinate clients health care needs. 
About 9 percent (1 of 11) of private fee-for-service insurers require physician referrals to access 
chiropractic services. 
CO-PAYMENTS, COINSURANCE, AND DEDUCTIBLES ARE USED TO HELP 
CONTROL CHIROPRACTIC BENEFITS BY MEDICARE AND PRIVATE INSURERS, 
BUT NOT BY MEDICAID 
Medicare and private insurers require co-payments, coinsurance, or deductibles.  Medicaid 
programs, however, typically do not require co-payments, coinsurance, or deductibles. 
A co-payment is a set amount beneficiaries must pay when they visit a physician.  The private 
insurers in our survey had co-payments ranging from $5.00 to $15.00 per chiropractic treatment. 
These co-payments are common in both managed care and fee-for-service plans. 
Coinsurance is the percentage of medical expenses for which a patient is responsible.  For 
Medicare Part B services, coinsurance equals 20 percent of approved charges. 
A deductible is the amount a beneficiary must pay before a health plan begins payment for 
covered services.  Medicare has a $100 annual deductible for Part B services, including 
chiropractic treatments.  Private insurers yearly deductibles ranged from $200 to $500 per year. 
These deductibles applied to all physician services, including chiropractic care. 
Medicaid fee-for-service programs required co-payments in only three States.  These co-payments 
ranged from 50 cents to $2.00 per chiropractic visit.  Likewise, only one Medicaid managed care 
organization responded that a co-payment was required -- $1.00 per visit. 
Such patient cost sharing may be important when considering how best to control chiropractic 
utilization.  A study by the Agency for Health Care Policy and Research suggests that the actual 
out-of-pocket expense a patient incurs greatly affects their use of chiropractic services.2  To 
illustrate, the study shows that when patients have to share 25 percent or more of the cost, they 
decrease their chiropractic usage by half. 
PREPAYMENT REVIEWS DO NOT CONTROL CHIROPRACTIC BENEFITS 
2 Agency for Health Care Policy and Research, Pub No. HS06920, 1996, The Affect of Cost Sharing on 
the Use of Chiropractic Services 
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8  Medicare and Medicaid Contractors Typically Do Prepayment Reviews, However, it Is 
Basically a Forms Verification Process 
All Medicare and Medicaid contractors conduct prepayment reviews.  However, the reviews are

merely computerized edits or manual reviews to ensure that claim forms are properly completed. 

The level of prepayment review for Medicare and Medicaid is similar and usually includes the

following edits:

!  appropriate procedure codes,

!  appropriate diagnosis codes,

!  date of X-ray,

!  date of first treatment falling within a specified time period of the X-ray date,

!  appropriate physician identification number, and 

!  no more than one treatment per day.

Medicare and Medicaid Prepayment Reviews for Medical Necessity Are Paper Audits 
Medicare and Medicaid policies require that all services be medically necessary.  However, 
Medicare and Medicaid contractors generally do not verify the medical necessity of chiropractic 
treatments. 
Medicare and Medicaid contractors, for example, typically review claims for medical necessity 
only if they exceed their soft caps.  One Medicare contractors policy states services exceeding 
more than what Medicare allows, in a given time frame, are subject to review for medical 
necessity.  Another commented that we review every claim for medical necessity that exceeds 
the cap.  A Medicaid agency said medical necessity must be documented in order to receive 
additional treatments (beyond the utilization cap). 
Medical necessity reviews in excess of the caps, however, are paper audits.  Contractors typically 
determine medical necessity by verifying that a claim form was completed properly.  They verify 
that the diagnosis codes are from the approved list.  In addition, they verify that comments, such 
as aggravated existing condition, are on the claim form.  In effect, such reviews are check the 
appropriate box edits, and not verification that services are truly medically necessary.  Patient 
records and other documentation of medical necessity are typically not reviewed. 
POST PAYMENT REVIEWS ARE USED BY MEDICAID, BUT NOT BY MEDICARE, 
TO HELP CONTROL CHIROPRACTIC BENEFITS 
Medicaid Contractors Use Post Payment Reviews to Help Control Chiropractic Utilization 
Sixty-five percent (17 of 26) of State Medicaid fee-for-service agencies monitor and control 
chiropractic claims using post payment reviews.  The reviews are typically limited to quarterly 
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9  Surveillance and Utilization Review Surveys.  Such reviews identify aberrant providers.  Three 
States said they do not do more extensive individual reviews due to the small nature of the 
chiropractic program and the limited number of problem claims found in the past. 
Medicare Contractors Rarely Conduct Post Payment Reviews of Chiropractic Claims 
HCFA policy requires Medicare contractors to conduct focused medical reviews and 
comprehensive medical reviews.  A focused review is a treatment specific audit, whereas a 
comprehensive review is a provider specific audit.  It is up to the contractors to determine which 
benefits to review.  All Medicare respondents conduct these reviews, however, most had focused 
little to no activity on chiropractic benefits since 1994. 
Eighteen percent (10 of 55) of Medicare respondents claimed to conduct focused reviews of 
chiropractic benefits.  Since 1994, three of the 10 respondents claimed to have saved about 
$759,000 as a result of focused reviews.  However, of the respondents, one accounted for over 99 
percent of those savings.  The remaining seven respondents conducted, on average, less than two 
focused reviews per year. 
Thirty-six percent (20 of 55) of Medicare respondents claimed to conduct comprehensive reviews 
of chiropractic benefits.  Ten respondents claimed their comprehensive reviews resulted in 
financial savings totaling about $330,500.  However, one of the respondents accounted for about 
71 percent of those savings.  The remaining respondents conducted varying numbers of reviews 
resulting in such things as educational efforts and a couple of fraud referrals. 
UNAUTHORIZED CHIROPRACTIC MAINTENANCE TREATMENTS ARE NOT 
DETECTED AND PREVENTED 
According to HCFA policy,3 chiropractic maintenance treatments are not authorized for payment. 
However, our analysis of a 1 percent sample of HCFAs National Claims History database 
showed that in 1996, Medicare likely paid for 28,889 chiropractic maintenance treatments.  These 
inappropriate maintenance treatments cost Medicare $688,821.  This projects to over $68 million 
for the Medicare program in 1996.  Projected over five years, Medicare reimbursements for 
unauthorized chiropractic maintenance treatments is about $447 million. 
Chiropractic Coverage Policies 
HCFAs Medicare Carrier Manual identifies treatment of acute and chronic subluxations as 
Medicare reimbursable conditions.  Maintenance treatments, however, are not a covered service. 
HCFA and local carrier policies, and Agency for Health Care Policy and Research guidelines, 
show that chiropractic treatment for acute conditions should consist of intense treatments early on 
with additional treatments tapering off quickly.  To illustrate, the HCFA approved Medicare Part 
3 HCFA Medicare Carrier Manual, section 2251.1 
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10  B Model Local Medical Review Policy for Chiropractic Service calls for vigorous therapy the 
first month, less vigorous therapy the second month, and finally, minimum therapy of up to 
four treatments the third month. 
However, HCFA and local carrier policies allow chiropractic treatment for chronic conditions. 
Such conditions require less frequent treatments than acute conditions.  A patients condition is 
considered chronic if it has existed for an extended period of time.  A chronic condition is not 
expected to be completely resolved, but continued chiropractic therapy is expected to result in 
some functional improvement.  Hence, chiropractic treatments may need to extend over long 
periods. 
On the surface, it seems difficult to distinguish between unauthorized chiropractic maintenance 
treatments and authorized treatments for chronic conditions.  The treatment patterns are similar. 
Unauthorized chiropractic maintenance treatments are generally indicated by consecutive months 
of  minimal therapy of four treatments or less.  Likewise, authorized chiropractic treatments for 
chronic conditions are generally indicated by four or fewer treatments per month for an extended 
time period. 
It is possible, however, to distinguish between the two.  To illustrate, a utilization frequency 
analysis of chiropractic treatments will enable carrier staff to identify potential unauthorized 
maintenance treatments.  However, some of these treatments could be for authorized chronic 
conditions.  Therefore, carrier staff must also review individual claims documentation to identify 
treatments for chronic conditions.  Beneficiary symptoms and chiropractor diagnosis are two 
pieces of claims information that allow carrier staff to distinguish between treatments for chronic 
conditions and maintenance. 
Estimated Medicare Reimbursement for Maintenance Treatments 
To estimate potential unauthorized Medicare reimbursements for chiropractic maintenance 
treatments, we conducted a utilization frequency analysis of chiropractic treatments in 1996. 
Thereafter, we adjusted our findings to exclude possible treatments for chronic conditions.  In 
making the adjustment, we did not review individual claims, but rather we used an estimate on the 
extent of chronic conditions nationwide. 
We based our utilization frequency analysis on a 1 percent sample of HCFAs 1996 National 
Claims History file.  We used the local model policy criteria of minimum therapy of four 
treatments or less in the third and final month of treatment.  We then identified beneficiaries with 
treatment utilization of two or more consecutive months of minimum therapy.  This analysis 
identified beneficiaries who received either maintenance or chronic chiropractic treatments (see 
appendix A for additional information on our methodology). 
HCFA data files did not distinguish between treatments for acute or chronic conditions. 
Therefore, we adjusted our findings by deleting chiropractic treatments for possible chronic 
conditions.  To do so, we used information provided by the American Chiropractic Association. 
That research showed that 10 percent of chiropractic conditions are chronic.  After eliminating 
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11  beneficiaries with chronic conditions from our analysis, we concluded that 7,594 Medicare 
beneficiaries received 28,889 probable unauthorized maintenance treatments at a cost of 
$688,821.  Table 7 summarizes maintenance treatments in 1996. 
TABLE 7 
NUMBER OF MEDICARE BENEFICIARIES RECEIVING UP 
TO FOUR CHIROPRACTIC TREATMENTS DURING TWO OR 
MORE CONSECUTIVE MONTHS IN 1996 
# Beneficiaries  #  Probable  Allowed 
Consecutive  Maintenance  Amounts 
Months  Treatments 
3,298  2  5,259  $125,058 
1,486  3  4,370  $104,321 
855  4  3,545  $84,788 
563  5  3,090  $74,388 
348  6  2,256  $53,751 
247  7  1,881  $45,103 
187  8  1,585  $37,462 
128  9  1,204  $28,298 
138  10  1,504  $36,012 
88  11  962  $23,356 
256  12  3,233  $76,284 
7,594  28,889  $688,821 
Our findings in Table 7 are based on a 1 percent sample, therefore, we projected them to the 
Medicare population.  We concluded that 759,400 Medicare beneficiaries received 2,888,900 
probable chiropractic maintenance treatments at a cost to the Medicare program of $68,882,100. 
Assuming chiropractic reimbursements continue to increase by 6.87 percent per year, Medicare 
reimbursements for unauthorized chiropractic maintenance treatments, over a five year window 
(1998-2002), would be about $447 million. 
At the request of HCFA officials, we included the above information, broken out by State, in 
appendix B. 
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12  R E C O M M E N D A T I O N S

This report describes controls used by Medicare, Medicaid, and other payers for chiropractic 
benefits.  Utilization caps were the most widely used control mechanism.  Needless to say, their 
intent is to limit the quantity of services.  However, neither the utilization caps, nor any of the 
other controls, detected and prevented reimbursements for unauthorized Medicare chiropractic 
maintenance treatments. 
Accordingly, we recommend that HCFA develop system edits to detect and prevent unauthorized 
payments for chiropractic maintenance treatments.  HCFA can do so by: 
!	 requiring chiropractic physicians to use modifiers to distinguish the categories of the spinal 
joint problems (i.e. acute, exacerbation, recurrence, and chronic), and 
!	 requiring all Medicare contractors to implement system utilization frequency edits to 
identify beneficiaries receiving consecutive months of minimal therapy. 
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13  COMMENTS

The HCFA Administrator, the Assistant Secretary for Planning and Evaluation (ASPE), and the 
Assistant Secretary for Management and Budget (ASMB) commented on our report.  The full 
text of their comments are in appendix C. 
The HCFA concurred with our recommendations.  The Balanced Budget Act of 1997 required 
HCFA to develop utilization guidelines for chiropractic care.  In developing such guidelines, 
HCFA will develop modifiers to distinguish categories of spinal joint problems, and utilization 
frequency edits as we recommended. 
ASPE agreed that edits to identify inappropriate billings seemed desirable.  However, ASPE 
commented that our use of averages, on pages four through six, to summarize the range of 
utilization caps was inappropriate because they did not reflect real practice.  Our report 
provides the reader both the average utilization caps and the actual utilization caps for all 
Medicare and Medicaid respondents. 
Further, ASPE suggested that more information is needed to substantiate two State Medicaid 
Administrators claims that physician referrals are effective controls for chiropractic services. 
Specifically, ASPE wanted to know how these States measured effectiveness.  Additionally, 
ASPE noted that it would be helpful to know how the use of chiropractic services are distributed 
between managed care and fee-for-service providers.  These questions were not part of the scope 
of this study.  However, we plan to continue our analysis of chiropractic services and utilization in 
the future.  These and other questions are likely topics for inclusion in future analysis. 
ASMB expressed serious concerns about the methodology we used to estimate payments for 
probable inappropriate chiropractic maintenance treatments.  Specifically, ASMB was concerned 
about our use of a 10 percent estimate to represent the Medicare population who received 
chiropractic care for chronic conditions.  The 10 percent estimate, furnished by the American 
Chiropractic Association, is a universal percentage estimate of the population at large. 
Demographic data and specific analysis is not available to differentiate between the Medicare 
population and the population at large.  However, we contacted several Medicare Carrier Medical 
Directors who stated, based on their reviews of Medicare chiropractic claims, that the 10 percent 
appeared to be a reasonable estimate for the Medicare population.  Additionally, HCFAs 
implementation of our recommendations will produce demographic data needed to more precisely 
differentiate chiropractic chronic care use by Medicare beneficiaries. 
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14  A P P E N D I X  A

SCOPE AND METHODOLOGY 
Medicare 
We had 55 responses to the Medicare fee-for-service survey.  We received responses for all 50 
States.  The additional five responses are detailed in Table 1. 
TABLE 1 
MEDICARE RESPONSES 
# of responses 
50 States  50 
California - serviced by 2 contractors  1 
Missouri - serviced by 2 contractors  1 
New York - serviced by 3 contractors  2 
District of Columbia  1 
Total  55 
Medicaid 
Our sample population consisted of 26 State fee-for-service programs that offered a chiropractic 
benefit to the majority of their Medicaid population.  Although 30 State fee-for-service programs 
reported offering some type of chiropractic service to Medicaid beneficiaries, four States only 
offered a very limited benefit to children as part of their Early and Periodic Screening, Diagnostic 
and Treatment program.  Due to the limited scope of those four programs, we excluded them 
from our sample. 
Although we surveyed both State Medicaid fee-for-service and managed care programs, for the 
purposes of this study we limited our primary Medicaid focus to those 26 State programs offering 
a chiropractic benefit through the traditional fee-for-service environment.  Observations made 
regarding State Medicaid managed care programs will be noted by specifically referring to that 
group. 
Utilization Caps 
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A - 1  Seven Medicare utilization caps and nine State Medicaid utilization caps are based on time 
periods other than one year.  For such States, we annualized their utilization caps accordingly. 
For example, one State reported a utilization cap of 76 treatments in 540 days.  Annualized, the 
cap is 51 treatments. 
Probable Maintenance Treatments 
To identify probable maintenance treatments we took several steps.  First, we used a 1 percent 
sample of HCFAs 1996 National Claims History file and identified 13,974 Medicare beneficiaries 
who received 122,047 chiropractic treatments at a cost of $2,937,668.  Next we did a utilization 
frequency analysis of this data and identified 8,990 beneficiaries with two or more consecutive 
months of minimal therapy (1-4 treatments).  These beneficiaries received 41,094 chiropractic 
treatments at a cost of $982,588.  We considered this subpopulation to be receiving unauthorized 
maintenance treatments or treatments for chronic conditions. 
In order to account for the chronic conditions, we used information provided by the American 
Chiropractic Association that showed that 10 percent of chiropractic conditions are chronic.  To 
be conservative, we assumed that the full 10 percent of chronic conditions were included in our 
sample.  Therefore, we took 10 percent of the 1 percent figures and subtracted them from our 
subpopulation figures.  For example, we took 10 percent of the $2,937,668 and subtracted it from 
our subpopulation treatment costs of $982,588.  This resulted in probable unauthorized 
maintenance charges, adjusted for chronic conditions, of $688,821. 
We used the same process to reduce the number of beneficiaries to 7,594 and the number of 
chiropractic treatments to 28,889.  Since these numbers are based on a 1 percent sample, we 
project them to the Medicare population to conclude that 759,400 Medicare beneficiaries received 
2,888,900 probable chiropractic maintenance treatments at a cost to the Medicare program of 
$68,882,100. 
Using Part B Extract and Summary System data for 1994 through 1997, we calculated the growth 
in Medicare chiropractic payments.  This growth averaged 6.87 percent per year.  We then used 
this growth rate to predict reimbursements for maintenance treatments for 1998 through 2002. 
Accepting that the $68.8 million in maintenance costs for 1996 would continue to go unchecked, 
and applying the 6.87 percent average growth, Medicare reimbursements for chiropractic 
maintenance treatments can cost in excess of $447 million from 1998 through 2002. 
Private Insurers 
Of the 20 private insurers surveyed, 10 were judgmentally selected Federal employee health 
benefit plans, and the other 10 were benefit managers for the largest, by number of employees, 
private sector companies. 
All 10 Federal employee plans responded, two of which had both a high and a standard 
option.  Therefore, we have 12 Federal employee plan responses. 
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A - 2  Seven of the 10 private sector companies responded, two of which offered both fee-for-service 
and managed care plans.  Therefore, we have 9 private sector company responses. 
Combined, we received 21 private insurer responses to our chiropractic survey.  However, four 
private insurers did not offer chiropractic benefits.  Therefore, we based our analysis on the 17 
private insurers that offered chiropractic benefits. 
We included private insurers in our inspection for comparison purposes.  We do not attempt to 
generalize to the private insurance population. 
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A - 3  A P P E N D I X  B

PROBABLE MAINTENANCE CHARGES 
TOTAL  TOTAL  ALLOWED  MAINTENANCE 
CHIROPRACTIC  ALLOWED  MAINTENANCE  MAINTENANCE  CHARGES AS % OF 
STATE  TREATMENTS  CHARGES  TREATMENTS  CHARGES  ALLOWED CHARGES 
NH  413  $9,902  147  $3,577  36.1% 
DC  59  $1,586  20  $540  34.0% 
IA  5,802  $130,193  1,975  $44,109  33.9% 
VT  333  $7,889  111  $2,583  32.7% 
SD  784  $17,343  231  $5,085  29.3% 
MI  6,994  $175,359  2,019  $50,296  28.7% 
MO  2,671  $58,477  756  $16,440  28.1% 
GA  2,654  $63,211  745  $17,662  27.9% 
DE  312  $7,863  85  $2,129  27.1% 
MA  2,059  $53,678  545  $14,147  26.4% 
OH  4,685  $111,027  1,232  $28,650  25.8% 
ND  858  $19,600  221  $5,037  25.7% 
AZ  2,415  $60,058  618  $15,285  25.5% 
PA  7,340  $178,658  1,869  $45,255  25.3% 
IL  6,739  $156,487  1,719  $39,517  25.3% 
ME  1,035  $25,737  259  $6,471  25.1% 
NM  349  $8,036  86  $1,990  24.8% 
UT  512  $12,093  127  $2,973  24.6% 
VA  1,878  $44,046  456  $10,449  23.7% 
KY  1,213  $25,875  292  $6,065  23.4% 
OR  1,598  $37,751  377  $8,834  23.4% 
IN  2,277  $50,692  535  $11,758  23.2% 
WA  3,635  $90,893  841  $21,081  23.2% 
CA  8,133  $208,445  245  $47,839  23.0% 
CO  1,059  $25,343  1,881  $5,818  23.0% 
CT  1,237  $33,982  281  $7,762  22.8% 
WY  223  $5,114  51  $1,160  22.7% 
NY  7,988  $210,107  1,833  $47,299  22.5% 
MN  2,916  $68,753  1,123  $15,008  21.8% 
NJ  5,092  $137,541  645  $30,038  21.8% 
TN  2,623  $59,188  1,045  $12,702  21.5% 
WI  4,719  $107,771  567  $23,200  21.5% 
MT  507  $11,360  107  $2,409  21.2% 
WV  464  $10,443  100  $2,189  21.0% 
KS  2,911  $67,623  608  $13,849  20.5% 
AK  188  $5,179  37  $1,046  20.2% 
NC  2,253  $50,867  457  $10,119  19.9% 
TX  7,445  $172,613  1,481  $34,071  19.7% 
AL  1,157  $25,410  231  $4,985  19.6% 
NE  1,988  $44,682  390  $8,720  19.5% 
FL  6,701  $166,095  1,294  $31,948  19.2% 
MD  860  $20,989  162  $3,947  18.8% 
ID  704  $15,722  127  $2,786  17.7% 
SC  800  $17,540  145  $3,102  17.7% 
AR  1,701  $38,920  287  $6,594  16.9% 
NV  650  $16,521  106  $2,695  16.3% 
RI  192  $4,972  30  $773  15.5% 
PR  79  $1,632  12  $252  15.4% 
LA  1,069  $23,820  163  $3,572  15.0% 
HI  155  $4,169  22  $604  14.5% 
MS  546  $11,758  67  $1,471  12.5% 
OK  1,058  $24,267  130  $2,924  12.0% 
Unknown  14  $388  0  $0  0.0% 
TOTALS  122,047  $2,937,668  28,889  $688,821  23.4% 
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B - 1
 A P P E N D I X  C

COMMENTS ON THE DRAFT REPORT 
We present, in full, comments from the HCFA Administrator, the Assistant Secretary for Planning 
and Evaluation (ASPE), and the Assistant Secretary for Management and Budget (ASMB). 
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C - 2
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C - 3
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C - 4
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C - 5
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C - 6
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C - 7