Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICAID  PAYMENTS  FOR 
INCONTINENCE  SUPPLIES  OFFICE  OF  INSPECTOR  GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect  the integrity of the Department  of Health and Human Services (HHS) 
programs as well as the health and welfare of beneficiaries served by those programs.  This 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by three OIG operating components:  the Office of Audit Services, the 
Office of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs the 
Secretary of HHS of program and management problems and recommends courses to correct 
them. 
OFFICE  OF  AUDIT  SERVICES 
The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent  assessments of HHS 
programs and operations in order to reduce waste, abuse, and mismanagement and to promote 
economy and efficiency throughout  the Department. 
OFFICE  OF  INVESTIGATIONS 
The OIGS Office of Investigations (01) conducts criminal, civil, and administrative investigations 
of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 
by providers.  The investigative efforts of 01 lead to criminal convictions, administrative sanctions, 
or civil money penalties.  The 01 also oversees State Medicaid fraud control units which 
investigate and prosecute fraud and patient  abuse in the Medicaid program. 
OFFICE  OF  EVALUATION  AND  INSPECTIONS 
The OIGS Office of Evaluation and Inspections (OEI) conducts short-term management  and 
program evaluations (called inspections) that focus on issues of concern to the Department,  the 
Congress, and the public.  The findings and recommendations contained in these inspection 
reports generate  rapid, accurate, and up-to-date information on the efficiency, vulnerability, and 
effectiveness of departmental  programs. 
This report was prepared  in the Philadelphia regional office under the direction of Robert  A 
Vito, Regional Inspector General.  Principal project staff 
REGION  III  HEADQUARTERS 
Robert  A. Katz, Lead Analyst  Stuart Wright, Program Analyst 
Robert  A. Baiocco, Program Analyst 
Linda M. Ragone, Program Analyst 
Cynthia R. Hans[ord, Program Assistant 
REGION  IV, OAS 
Bernard Rach, Project Leader 
Foradditionaclopies of this report,  please contact  the Philadelphia  Regional  Office at (800) 531-9562.  EXECUTIVE  SUMMARY 
PURPOSE 
This  report  provides  information  on inappropriate  billings  and  payments  for 
incontinence  supplies  in the  Medicaid  program. 
BACKGROUND 
The  Medicaid  program  is jointly-funded  by Federal  and  State  Governments  to provide 
medical  care  for low-income  individuals.  The  program  is administered  by the  Health 
Care  Financing  Administration  (HCFA)  under  authority  of Title  XIX  of the  Social 
Security  Act.  In Fiscal  Year  1993, Medicaid  expenditures  totaled  approximately  $126 
billion  for  33 million  recipients. 
The  Medicaid  program  varies  considerably  in each  State.  Within  broad  national 
guidelines,  States  establish  eligibility,  coverage,  claims  processing,  and  payment 
policies.  Some  Medicaid  recipients  are  eligible  for Medicare  in addition  to their 
Medicaid  coverage.  In these  instances,  Medicare  is the  primary  payer  for  covered 
services.  In accordance  with a States  particular  plan,  Medicaid  assumes  responsibility 
for the  recipients  premiums,  deductibles,  and  coinsurance.  Payments  made  by 
Medicaid  for these  dually  eligible  individuals  are  called  crossover  payments. 
Incontinence  is the  inability  to control  urinary  and  bowel  functions.  Under  the 
Medicaid  program,  States  have  the  option  to cover  incontinence  care  supplies  and 
related  equipment.  Based  on prescriptions  furnished  by patients  physicians,  such 
supplies  and  equipment  could  include  disposable  pads,  irrigation  syringes,  saline 
solutions,  and  collection  devices. 
We  recently  reviewed  Medicare  payments  for incontinence  supplies.  We  found  that

questionable  billing  practices  may have  accounted  for almost  $100 million  or half  of

incontinence  allowances  in 1993.  We  also found  that  suppliers  engage  in questionable

marketing  practices  to nursing  homes  and  that  Medicare  beneficiaries  may be

receiving  unnecessary  or noncovered  supplies.  We  conducted  this  current  review  to

inform  HCFA  if similar  practices  existed  in the  Medicaid  program.  We  concentrated

on  14 States  which  represent  approximately  76 percent  of 1993 Medicare  payments  for

incontinence  supplies. 
This  inspection  was conducted  as part  of Operation  Restore  Trust,  a pilot  program 
that  coordinates  Federal,  State,  and  local  anti-fraud  activity  in five States.  The 
program  will target  abuses  in home  health  agencies,  nursing  facilities,  and  durable 
medical  equipment,  including  incontinence  supplies. 
i  Half of the Statesin our sampleident@ed improperMedicaidbillingsfor incontinence 
supplies. 
Seven  Medicaid  State  agencies  encountered  improper  billings  for incontinence 
devices  and  supplies.  These  States  identified  a wide variety  of improper  claims 
such  as billings  for recipients  who were  not  incontinent,  billings  for  supplies  that 
were  never  delivered,  and  billings  for excessive  quantities  of diapers  for nursing 
home  patients.  Overpayment  amounts  identified  included  $107 million  in 
California  and  almost  $2 million  in New York. 
Statesdo not genera~ reviewthe appropriatenesosr necessityof incontinenceservices 
paid by them on crossover. 
States  do not  generally  review  the  appropriateness  or necessity  of their 
crossover  payments.  Since  Medicare,  as the  primary  payer,  has  rndde  the
payment  determination,  many  States  accept  Medicares  decisions  as valid  and 
do not  question  the  propriety  of such payments. 
Medicaredoes not requirecarriersto notijj MedicaidStateagenciesof improperMedicare 
P~  made on behalfof Me&aid  beneficiaries. 
The  Medicare  program  does  not  have  guidelines  requiring  carriers  to  notify 
Medicaid  State  agencies  of improper  Medicare  payments.  Thus,  States  are 
often  unaware  of improper  crossover  payments,  and,  as a result,  may be  unable 
to  collect  inappropriately  paid  Medicaid  monies. 
RECOMMENDATIONS 
We  recommend  that  HCFA  (1) alert  Medicaid  State  agencies  about  this vulnerability 
regarding  incontinence  supplies,  and  (2) take  appropriate  steps  to  ensure  that 
Medicaid  State  agencies  are  notified  of improper  Medicare  payments  which 
contractors  discover  have  been  made  on behalf  of a Medicaid  beneficiary. 
While  this report  is limited  to  a review  of Medicaid  payments  for incontinence
supplies,  we believe  that  the  problems  identified  associated  with  potentially  improper 
crossover  payments  are  not  limited  to these  supplies.  If Medicaid  State  agencies  are 
not  informed  of the  existence  of improper  Medicare  payments  on behalf  of a 
Medicaid  beneficiary,  Medicaid  is powerless  to  avoid  or recoup  the  related  improper 
Medicaid  crossover  payment.  Thus,  our  second  recommendation  is applicable  to  all 
Medicare  services  provided  to Medicaid  recipients,  not just  incontinence  supplies. 
We  cannot  precisely  estimate  the  dollar  savings to the  Medicaid  program  that  would 
result  from  implementing  these  recommendations,  but,  based  on the  information  we 
have  gathered  it probably  amounts  to several  million  dollars  per  year. 
ii  AGENCY  COMMENTS  AND  OFFICE  OF  INSPE~OR  GENERAL  RESPONSE 
We  appreciate  HCFAS  positive  response  to our  recommendations.  The  HCFA  plans 
to focus  attention  on this matter  as part  of their  overall  fraud  and  abuse  prevention 
and  detection  strategy.  Additionally,  they plan  to amend  the  Medicare  Carriers 
Manual  to require  that  carriers  notify Medicaid  State  agencies  about  improper 
payments  made  on behalf  of Medicaid  beneficiaries.  We  support  HCFA  in these 
initiatives.  The  full text  of HCFAS comments  can be  found  in Appendix  A. 
.. .
111  TABLE  OF  CONTENTS 
PAGE 
EXECUTIVE  SUMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
FINDINGS.  . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4 
 
Improper  payments..  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..4 
  No review  ofcrossover  claims  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4 
.  No notification  about  improper  Medicare  payments  . . . . . . . . . . . . . . . . . . . . .  6 
RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . .  7 
APPENDIX  A 
HCFA  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  A-1  INTRODUCTION 
PURPOSE 
This  report  provides  information  on inappropriate  billings  and  payments  for 
incontinence  supplies  in the  Medicaid  program. 
BACKGROUND 
lke  MedicaidRcgram 
Medicaid  is a jointly-funded  health  insurance  program  between  Federal  and  State 
Governments  to provide  medical  care  for low-income  individuals.  The  program  is 
administered  by the  Health  Care  Financing  Administration  (HCFA)  under  authority  of 
Title  XIX  of the  Social  Security  Act.  Nationally,  Medicaid  expenditures  totaled 
approximately  $126 billion  for 33 million  recipients  in Fiscal  Year  1993. 
The  Medicaid  program  varies  considerably  from  State  to State.  Within  broad  national 
guidelines,  States  establish  eligibility  standards,  determine  the  scope  of services, 
promulgate  claims  processing  policies,  and  set payment  rates  for various  medical 
services.  Each  State  designs  and  manages  its Medicaid  program  through  a designated 
agency. 
In some  cases,  Medicaid  recipients  are  eligible  for Medicare  in addition  to their 
Medicaid  coverage.  In these  instances,  Medicare  is the  primary  payer  for  covered 
services.  After  Medicare  carriers  process  a claim  for a dually  eligible  beneficiary,  they 
send  an electronic  notification  to the  States.  In accordance  with  a States  particular 
plan,  Medicaid  assumes  responsibility  for the  recipients  premiums,  deductibles,  and 
coinsurance.  Payments  made  by Medicaid  for these  dually  eligible  beneficiaries  are 
called  crossover  payments. 
Inconkwce  Supplies 
Incontinence  is the  inability  of the  body  to control  urinary  and  bowel  functions.  Under 
the  Medicaid  program,  States  have  the  option  to cover  incontinence  care  supplies  and 
related  equipment  and  accessories.  Based  on prescriptions  furnished  by patients 
physicians,  such  supplies  and  equipment  could  include  disposable  pads,  irrigation 
syringes,  saline  solutions,  and  collection  devices. 
CarrierClaimsI%ocessing 
In June  1992, HCFA  issued  a final rule  designating  four  Durable  Medical  Equipment 
Regional  Carriers  (DMERCS)  to process  all claims  for  durable  medical  equipment, 
prosthetics,  orthotics,  and  supplies.  In October  1993, the  DMERCS  began  replacing 
the  32 carriers  which  had  previously  processed  DME  claims.  The  geographical  areas 
1
 formerly  serviced  by the  carriers  were  phased  in under  the  DMERCS  on a staggered 
basis.  To  ensure  consistency  in medical  review  policies,  each  DMERC  issues  identical 
coverage  and  reimbursement  policies  that  implement  Medicare  guidelines. 
~ce  of IiupectorGeneralStudieson IncontinenceSupplies 
We  recently  completed  two studies  on incontinence  supplies  provided  to Medicare 
beneficiaries.  One  of these  was entitled,  Marketing OfIncontinence  Supplies  (OEI-03-
94-00770).  We  found  that  (1) information  from  nursing  homes  indicates  that  suppliers 
engage  in questionable  marketing  practices,  (2) beneficiaries  may be  receiving 
unnecessary  or noncovered  supplies,  and  (3) many  nursing  homes  do not  provide  the 
Medicare-reimbursed  supplies  to the  specific  beneficiary  for whom  the  supplies  were 
billed. 
The  second  of these  studies  was entitled,  Questionable Medicare Payments  For 
continence  Supplies (OEI-03-94-O0772).  We  found  that  (1) Medicare  allowances 
more  than  doubled  in 3 years  despite  a drop  in the  number  of beneficiaries  using 
incontinence  supplies,  (2) four  types  of incontinence  supplies  accounted  for  most  of 
the  increase  in Medicare  allowances,  and  (3) questionable  billing  practices  may  have 
accounted  for almost  $100 million  or half of incontinence  allowances  in 1993. 
We  then  conducted  a third  study to determine  if similar  practices  existed  in the 
Medicaid  program.  This  report  is the  result. 
OperationRestoreThst 
This  inspection  was conducted  as part  of Operation  Restore  Trust,  a pilot  program 
that  coordinates  Federal,  State,  and  local  anti-fraud  activity  in five States.  The 
program  will target  abuses  in home  health  agencies,  nursing  facilities,  and  DME 
equipment,  including  incontinence  supplies.  The  projects  initial  focus will be  in 
California,  Florida,  Illinois,  New York,  and  Texas. 
METHODOLOGY 
Since  there  is no national  database  of Medicaid  payments  for incontinence  supplies 
and  related  accessories,  we reviewed  a sample  of Medicaid  State  agencies  based  on 
Medicare  utilization  rates.  We  selected  14 States  where  incontinence  payments  under 
Medicare  were  the  highest:  Alabama,  California,  Florida,  Georgia,  Illinois,  Louisiana, 
Massachusetts,  Missouri,  New Jersey,  New York,  Ohio,  Oklahoma,  Pennsylvania,  and 
Texas.  These  14 States  represent  approximately  76 percent  of 1993 Medicare 
payments  for incontinence  supplies.  All five of the  Operation  Restore  Trust  States 
were  included  in our  sample. 
We  contacted  the  14 Medicaid  State  agencies  as well as the  Medicaid  Fraud  Control 
Units  in these  States  to  determine  (1) the  extent  of Medicaid  payments,  including 
crossover  payments,  and  (2) improper  payments  for incontinence  devices  and  supplies. 
2  We  also  requested  details  of every reported  fraud  and  abuse  case.  We  received 
information  from  13 of the  14 States  sampled.  All of the  responding  States  cover 
incontinence  supplies;  however  the  coverage  policies  are  not  identical. 
To  determine  how  overpayments  in crossover  claims  are  recovered,  we contacted  the 
Medicare  contractor  fraud  units  in carriers  which  cover  geographical  areas  served  by 
the  Medicaid  State  agencies.  These  units  oversee  fraud  and  abuse  detection  and 
prevention  activities  within  the  carriers.  We  also contacted  the  fraud  units  in the  four 
DMERCS  for information.  To  determine  if the  responses  from  the  fraud  units  were 
representative  of overall  carrier  procedures,  we also contacted  carrier  personnel 
involved  in overpayment  and  recovery  activities  in general.  In all, we received 
responses  from  14 carriers  and  four  DMERCS. 
This  inspection  was conducted  in accordance  with the  Quali~  Standards for Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
3  FINDINGS 
HALF  OF  THE  STATES  IDENTIFIED  IMPROPER  MEDICAID  BBIJNGS  FOR 
INCONTINENCE  SUPPLIES. 
Seven  of the  13 responding  States  had  encountered  improper  billing  practices  for

incontinence  devices  and  supplies.  The  seven  States  were  California,  Florida,

Louisiana,  Massachusetts,  New York,  Ohio,  and  Pennsylvania.  The  States  identified  a

wide  variety  of improper  billings,  including:  (1) billings  for recipients  with  no

incontinence  problems,  (2) billings for supplies  which were  never  delivered,  (3) billings

for excessive  quantities  of diapers  for nursing  home  patients  (up  to  600 a month  in

some  cases),  and  (4) billings for  supplies  which were  already  paid  in a nursing  homes

daily rates. 
Payment  amounts  associated  with these  improper  billings were  not  readily  available  in 
most  States  or could  not  be  extracted  from  data  including  other  types  of supplies,  such

as enteral  and  ostomy  supplies.  Two States  could  provide  overpayment  data  for

incontinence  supplies:  The  overpayment  amounts  were  $107 million  in California  and

almost  $2 million  in New York.

Improperincontinencesupp~ billingswereso prevalentthat Calijiomiaoganized a special 
taskforce to attacktheproblem. 
The  California  Medicaid  program  (known  as Medi-Cal)  uncovered  widespread  fraud  in

supplier  billings  for incontinence  supplies.  As a result,  program  officials  organized  a

special  task  force  to combat  the  problem.  Multiple  suppliers  using  abusive  and

fraudulent  practices  were  identified.  In one  scheme,  that  some  newspapers

characterized  as diaperscam,  unscrupulous  suppliers  went  door  to door  enticing

Medicaid  beneficiaries  to provide  their  signatures  and  Medicaid  identification  numbers

in exchange  for  medical  supplies.  This  practice  enabled  suppliers  to bill Medi-Cal  for

incontinence  supplies  for recipients  who were  not  incontinent.

STATES  DO  NOT  GENERALL  Y REVIEW  THE  APPROPRIATENESS  OR 
NECESSITY  OF  INCONTINENCE  SERVICES  PAID  BY THEM  ON 
CROSSOVER. 
In general,  States  do not  review  the  appropriateness  or necessity  of their  crossover 
payments.  As primary  payer  for dually eligible  individuals,  Medicare  determines

whether  claimed  services  should  be  reimbursed.  Needless  to say, in such

circumstances,  many  States  accept  Medicares  decisions  as valid  and  do not  question

the  propriety  of such payments.

Only  one  State  had  reviewed  the  appropriateness  of Medicaid  crossover  payments  for

incontinence  supplies.  Among  the  States  that  did not  review  crossover  payments,  four

maintained  that  Medicare  was responsible  for verifying  the  accuracy  and  integrity  of

4  these  claims.  Another  four  States  reported  they  did not  have  the  technological 
capability  to  target  these  claims  for review.  The  remaining  States  indicated  they  had 
not  conducted  reviews  of crossover  incontinence  claims  since  they  had  not  identified 
aberrant  billings  or received  complaints  relating  to incontinence  supplies.  One  State 
representative  said  suppliers  should  be  required  to submit  claims  for  crossover 
reimbursements  directly  to  Medicaid  agencies  as this would  put  the  States  in a better 
position  to determine  the  propriety  of these  payments. 
Crossoverpaymentscompriw a si*ant  pvtion  of totalMedicaidpaymen~ for 
incontinencesuppliixin sonw States. 
Of the  three  States  that  reported  significant  crossover  payments  for incontinence 
supplies,  crossover  payments  were  exceedingly  larger  than  regular  Medicaid  payments 
for incontinence  supplies.  The  table  below  compares  Floridas  Medicaid  crossover 
payments  with  regular  Medicaid  payments  for incontinence  supplies.  Crossover 
payments  exceeded  regular  Medicaid  payments  for three  frequently  billed  incontinence 
supplies  by more  than  $1.4 million. 
Florida Medicaid  Payments for Three 
Imxmtinenee Sunnlv Cocks in Ikal  Year  1994 
Irrigation syringes (A4322)  I  $10.458I  $455.975 
Saline solutions (A4323)  40,365  851,349 
In Texas,  more  than  $700,000 was paid  in crossover  payments  for the  three  supplies 
listed  above  compared  to  $45,000 in Medicaid-only  payments.  Missouri  reported 
crossover  payments  exceeding  $430,000 for all incontinence  supplies  in Fiscal  Year 
1994. 
Floridkhas initiateda reviinvof the appropriatenasof crossoverchims. 
The  Florida  Medicaid  agency  has  recently  initiated  a plan  to review  crossover

payments  for incontinence  supplies.  When  the  Medicaid  agency  was first  contacted,

they  advised  us they  did not  conduct  utilization  reviews  of crossover  claims.

Furthermore,  they  said that  no suppliers  had  been  identified  as submitting

questionable  claims.  However,  after  our  initial  contact,  18 suppliers  were  identified

for  submitting  questionable  billings for incontinence  supplies  to the  Florida  Medicare

carrier.  Potential  overpayments  to these  suppliers  totaled  in excess  of $60 million.

(The  Florida  carrier  had  accounted  for over  half  of all incontinence  allowances  in 1993

as well as the  bulk  of questionable  payments  nationally.)  The  Medicaid  agency  had

reimbursed  crossover  claims  for a number  of these  suppliers.  Because  of the  large

5  number  of questionable  billings  to Medicare,  a task  force  was formed  to  combat  the 
problem.  The  task  force  will also address  crossover  claims.  In addition,  the  Florida 
Medicaid  agency  has  sent  letters  to recipients  inquiring  about  their  need  for 
incontinence  supplies  and  asking  if they  had  received  the  supplies  in question. 
MEDICARE  DOES  NOT  REQUIRE  CARRB3RS  TO  NOTIFY  MEDICAID 
STATE  AGENCIES  OF  IMPROPER  MEDICARE  PAYMENTS  MADE  ON 
BEHALF  OF  MEDICAID  BENEFICIARIES. 
Medicare  guidelines  do not  require  carriers  to notify Medicaid  programs  of the 
existence  of Medicare  overpayments.  Only five of the  18 carriers  and  DMERCS  which 
responded  to our  requests  report  that  they  routinely  notify  Medicaid  State  agencies 
when  they  learn  of potential  crossover  overpayments.  Only one  of the  four  DMERCS 
routinely  notifies  Medicaid.  Two other  DMERCS  notify Medicaid  on an  irregular 
basis.  None  of the  responding  carriers  or DMERCS  had  written  policies  concerning 
the  handling  of crossover  overpayments. 
Of the  18 carriers  and  DMERCS  which  responded  to  our  requests  for information,  17 
indicated  they  are  not  required  by Medicare  to notify Medicaid  State  agencies  when 
they  learn  of potential  crossover  overpayments.  Only one  respondent  said  they were 
required  to notify  Medicaid  State  agencies.  However,  this requirement  pertained  only 
to Medicaid  Fraud  Control  Units  in suspected  fraud  cases,  the  respondent  explained. 
The  Medicare  Carriers  Manual  and  the  Code  of Federal  Regulations  (see  42 CFR 
405.375)  contain  provisions  allowing  Medicare  contractors  to withhold  Medicare 
payments  to  recover  Medicaid  overpayments  that  a Medicaid  agency  has  been  unable 
to collect.  However,  if Medicaid  agencies  are  not  notified  that  crossover  claims  are 
potentially  improper,  they will be  unable  to initiate  collection  actions,  including  this 
mechanism  to collect  Medicaid  overpayments. 
6  RECOMMENDATIONS 
Our  findings  indicate  that  Medicaid  is vulnerable  to questionable  billing  practices  for 
incontinence  supplies.  In one  State,  California,  improper  payments  exceeded  $100 
million.  Other  States  experienced  problems,  but  to  a lesser  degree. 
We  also found  that  States  do not  generally  review  the  appropriateness  or necessity  of 
incontinence  services  paid  by Medicare,  and  that  Medicare  does  not  require 
contractors  to notify  Medicaid  State  agencies  of improper  crossover  payments  made 
on behalf  of Medicaid  beneficiaries.  Thus,  States  may inadvertently  make  unallowable 
payments  for  Medicare  copayments. 
We  recommend  that  HCFA  (1) alert  Medicaid  State  agencies  about  this vulnerability 
regarding  incontinence  supplies,  and  (2) take  appropriate  steps  to ensure  that 
Medicaid  State  agencies  are  notified  of improper  Medicare  payments  which 
contractors  discover  have  been  made  on behalf  of a Medicaid  beneficiary. 
While  this report  is limited  to a review  of Medicaid  payments  for incontinence 
supplies,  we believe  that  the  problems  identified  associated  with potentially  improper 
crossover  payments  are  not  limited  to these  supplies.  If Medicaid  State  agencies  are 
not  informed  of the  existence  of improper  Medicare  payments  on behalf  of a 
Medicaid  beneficiary,  Medicaid  is powerless  to avoid  or recoup  the  related  improper 
Medicaid  crossover  payment,  Thus,  our  second  recommendation  is applicable  to  all 
Medicare  services  provided  to Medicaid  recipients,  not just  incontinence  supplies. 
We  cannot  precisely  estimate  the  dollar  savings to the  Medicaid  program  that  would 
result  from  implementing  these  recommendations,  but,  based  on the  information  we 
have  gathered  it probably  amounts  to several  million  dollars  per  year. 
AGENCY  COMMENTS  AND  OFFICE  OF  INSPECTOR  GENERAL  RESPONSE 
We  appreciate  HCFAS positive  response  to  our  recommendations.  The  HCFA  plans 
to focus  attention  on this matter  as part  of their  overall  fraud  and  abuse  prevention 
and  detection  strategy.  Additionally,  they  plan  to amend  the  Medicare  Carriers 
Manual  to require  that  carriers  notify  Medicaid  State  agencies  about  improper 
payments  made  on behalf  of Medicaid  beneficiaries.  We  support  HCFA  in these 
initiatives.  The  HCFA  also provided  a technical  comment  relating  to how DMERCS 
develop  national  policies.  We  have  revised  our  report  in accordance  with  this 
comment.  The  full text  of HCFAS comments  can be  found  in Appendix  A. 
7  APPENDIX  A 
HCFA  COMMENTS 
A-1  Health Care Financing  Administration  (HCFA) Comments  on 
OffIce  of Inspector  General  (OIG)  Drafl  Report:  Medicaid  Pavments  for Incontinence 
Supplies  (OEI-03-94-00771) 
OIG Recommendation 
OIG recommends  that HCFA  implement  procedures  to require  Medicare  contractors  to 
notify  the Medicaid  State  agencies  on a routine basis of improper Medicare payments 
made on behalf of a Medicaid beneficiary. 
HCFA Response 
We concur.  We will focus our attention  on this particular problem as part of our overall 
fraud and abuse prevention and detection  strategy.  TOensure that Medicaid State 
agencies are made aware of improper Medicare payments a fraud alert regarding 
inappropriate  billing for incontinence  devices was sent to all Medicaid Fraud LJnk  in 
March  1994.  The Mediwe  Carriers Manual will be amended to require that Medicare 
carriers not@  the Medicaid State agency on claims retroactively  denied to enable 
Medicaid to recover its payment.  MSO,we will require carriers to inform agencies to 
suspend payment  after the claims are approved  so as not to incur crossover payment. 
Technical Comments 
The report states that -h  Dwble  Medical E@pment  Regional Carrier (DMERC) 
issues its own cov~e  and reimbursement  policies mat implement  Medicare @delines. 
This is not entirely mmect.  TOWmply witi  tie  D~RC  con~ct  for fis~  yw  1995, the 
DMERC medical directors am required  to Mlltimte  in the development  of regional 
medieal review policies forIME,  prosthetics,orthotics,  am-l supplies.Thefind policies 
that are published by each of the DMERCS in their supplier bulletins  must be identical. 
The DMERCS are required to publish identid  Poficies to e~ure  mnaistency  in coverage 
determinations  and avoid coverage variations across the four regional  carriers.