Department of Health and Human Services
 
OFFICE OF 

 
INSPECTOR GENERAL 

 
 
 
 
 
 
 
D M
UPLICATE  EDICAID AND 

 
 
M H H
EDICARE  OME  EALTH 

 
  P :
   
AYMENTS   
 
M S
E DICAL  UPPLIES AND 

 
T S  
HERAPEUTIC  ERVICES 

 
 
 
 
Daniel R. Levinson 
  
Inspector General 

 
May 2008 
 
OEI-07-06-00640 
   
Office of Inspector General

http://oig.hhs.gov  
 
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 the  following operating components:  
Office of Audit Services 
The Office  of  Audit Services  (OAS) provides 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.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections  
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving  program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
Office of Counsel to the Inspector General 
The  Office of Counsel to the Inspector General (OCIG)  provides  general legal services  to  
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
legal support for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and abuse cases involving HHS programs,  including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.    
   
  E X E C U T I V E   S U M M A R Y  
OBJECTIVE 
 
1. 	  To determine, in five States, the extent to which both Medicaid and 
Medicare paid home health providers for the same medical supplies 
and therapeutic services. 
2. 	 To identify the controls that these five States have established that 
are intended to prevent duplicate payments. 
BACKGROUND 
Home health services seek to restore health and  minimize the effects of  
illness and disability, thereby enabling beneficiaries to reside in 
community settings and avoid institutionalization. These services 
include nursing care, speech therapy, and physical therapy.  Both 
Medicaid and Medicare  pay home  health providers for services specified 
in the plans of care for beneficiaries; however, both should not pay for  
the same medical supplies or services for the same beneficiary.   
Medicaid is the payor of last resort; therefore, Medicaid should pay for 
home health services only if Medicare or another payor does  not pay for 
them.  Medicare pays home health providers through the Prospective  
Payment System (PPS) for qualified home health services provided 
during episodes of care.    
We examined Medicaid and Medicare home health claims in five 
States: Florida, Maryland, North Carolina, Ohio, and Texas.  During  
the period of our review,  these Medicaid programs paid a total of 
$184 million for 2.2 million claims for home health supplies and services 
coverable by Medicare.   We matched Medicaid home health claims 
against Medicare home health PPS  claims using Social Security 
numbers and dates of service and identified duplicatively paid home  
health claims; we did not rely on the dual eligibility indicator field, 
which may have been incorrect.   For the purposes of this study, we 
defined a duplicate payment as any Medicaid payment for a 
PPS-covered service or supply on a date falling within a Medicare 
episode of care.  We did  not attempt to determine medical necessity or 
appropriateness.   
FINDINGS 
In four of the five States reviewed, Medicaid inappropriately  paid 
$1 million in 2005 for nonroutine medical supplies and therapeutic 
  OEI-07-06-00640   DUPLICATE MEDICAID AND MEDICARE  HOME  HEALTH  PAYMENTS:   SUPPLIES AND SERVICES   i    
   
E X E C U T I V E   S U M M A R Y   
 
services that  were paid by Medicare.   Of the 84,061 inappropriately 
paid claims, 98 percent were for nonroutine medical supplies and 
2 percent were for therapeutic services. All inappropriately paid claims 
were for supplies and services included on the publicly available list of 
Medicare-covered PPS services for 2005. 
Medicaid paid $6.6 million for routine supplies on the same dates as 
home health services; Medicare coverage of routine supplies cannot 
be determined from claims data.  Because Medicare PPS covers the cost 
of routine medical supplies that are customarily used in small 
quantities during the course of a therapeutic or assistive home health 
service, it is possible that these medical supplies were included in the 
Medicare payment and Medicaid should not have paid for them.  
However, claims data do not indicate whether a routine supply was 
provided during the course of another service.   Therefore, the State 
Medicaid agency cannot determine whether Medicaid or Medicare 
should pay for these routine supplies leading to a potential 
vulnerability.  
All States reported having controls to prevent duplicate payments, but 
these did not eliminate all inappropriate payments. All five States 
relied on Medicare eligibility indicators and payment system edits to 
compare claims for home health services to Medicare eligibility 
information; however, incomplete eligibility information and payment 
system edit overrides may still allow inappropriate payments. 
Despite Medicaid being the payor of last resort, State officials 
reported that they lacked direct access to Medicare claims data to 
determine whether Medicare had already  paid.  Most inappropriately 
paid claims were likely paid after Medicare made the initial payments 
for the episodes, and Medicaid paid  10 percent of inappropriate claims 
after the final Medicare payments.  The order of claims submission 
dates and payment dates indicates that some home health providers are 
submitting Medicaid claims for  medical supplies and therapeutic 
services when they have  already received Medicare payments.  States 
requiring Medicare denial notices had fewer inappropriately paid 
claims. 
RECOMMENDATIONS 
Our results show that Medicaid inappropriately paid for some home 
health supplies and therapeutic services for which Medicare also paid.   
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E X E C U T I V E   S U M M A R Y   
Therefore, we recommend that CMS: 
Ensure that Medicaid does not pay providers for Medicare-paid  
nonroutine medical supplies and therapeutic services. CMS could 
accomplish this by:  working with States and the Regional Home Health 
Intermediaries to determine the costs and benefits of requiring 
providers to  request from Medicare  denial of payment notices that 
would then  be submitted to the Medicaid program, addressing the  cause 
of the inadequate Medicare eligibility data, determining the utility of 
allowing providers to override Medicaid payment denials for home  
health services, requesting States to reeducate providers on the 
requirement that Medicaid be the payor of last resort, and making 
current Medicare home  health payment information available directly 
to States.   
Clarify  CMS policy  on Medicare PPS coverage of routine medical  
supplies.   CMS should clarify what constitutes Medicare-covered routine 
medical supplies used in the course  of a therapeutic or assistive service 
and provide greater specificity on when routine medical supplies are paid 
for under Medicare PPS.  Specifically, definitions of required in quantity 
and recurring need with respect to  whether routine supplies should be 
considered nonroutine are needed.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
In its written comments on the report, CMS stated that it did not 
disagree with our first recommendation and recognized the  importance  
of preventing duplicate Medicaid and Medicare billings.  CMS offered 
what it believes is a simplification of one of our suggestions to address 
the first recommendation, which involves Medicare sending a copy of 
the denial of payment notice to the State Medicaid program.  CMS 
concurred with our second recommendation to clarify policy on coverage 
of routine medical supplies under Medicares home health PPS.   
CMS commented on the methodology of this review, stating that the 
absence of medical record review limits the findings.  However, our 
claims analysis was sufficient to definitively identify $1 million in 
inappropriate Medicaid payments, as  well as to identify vulnerabilities 
that CMS should address to prevent duplicate payments.  CMS also 
stated that our second finding is an assumption rather than fact.  Our 
second finding is factual. We make  no assumption about whether these 
payments were inappropriate.  
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  T A B L E   O F   C O N T E N T S  
 
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
  
 
 
 
 
I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
  
 
 
 
 
F I N D  IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8 
  
States inappropriately paid $1 million. . . . . . . . . . . . . . . . . . . . . . .  8 
  
 
  Medicaid paid $6.6 million for routine supplies on the same  

dates as home health services  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10 
  
 
Controls did not eliminate all inappropriate payments. . . . . . . . .  11 
  
 
State officials reported that they lacked direct access to  

 
Medicare claims data  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12 
  
 
 
 
 
R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14 
  
Agency Comments and Office of Inspector General Response . . .  15 

 
   
 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17 
  
  Appendix A:  Medicare Coverage of Nonroutine and Routine  
Medical Supplies .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   17 
  
 
  Appendix B:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . .  18 
  
 
 
   
 
 
A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21 
  
 
 
 
 
  OEI-07-06-00640  DUPLICATE MEDICAID AND MEDICARE HOME HEALTH PAYMENTS:  SUPPLIES AND SERVICES  iv   
   
  I N T R O D U C T I O N  
OBJECTIVE 
1. 	 To determine, in five States, the  extent to which both Medicaid and 
Medicare paid home health providers for the same medical supplies 
and therapeutic services. 
2. 	 To identify the controls that these five States have established that 
are intended to prevent duplicate payments. 
BACKGROUND 
Home Health Services 
Home health services are intended to restore health and minimize the 
effects of illness and disability, thereby enabling beneficiaries to reside 
in community settings and avoid institutionalization.  These services 
include: 
 	  nonroutine and routine medical supplies;1  
 	  therapeutic servicesspeech, occupational, and physical therapy 
and medical social services; and 
 	  assistive serviceshome health aide and skilled nursing services. 
Both Medicaid and Medicare pay home health providers for home  
health services specified in the plans of care for beneficiaries;  
however, both should not pay for the same medical supplies or 
services for the same beneficiary.2 Each program has specific 
payment structures and limitations on the services covered.   This 
study examined Medicaid and Medicare payments for medical 
supplies and therapeutic services.  A companion study will examine 
Medicaid and Medicare payments for assistive services.   
 
1 The Centers for Medicare & Medicaid Services (CMS).  Medicare Home Health Agency  
Manual defines medical supplies as items that, because of their therapeutic or 
diagnostic characteristics, are essential in enabling home health agency personnel to 
conduct home visits or to  effectively carry out the services on the plan of care.  Medicare 
Home Health Agency Manual, Pub. 11, section 206.4. 
2 Both Medicare  and Medicaid cover only home health services ordered on a written plan  
of care for a specific beneficiary  that a physician reviews every  60 days.  CMS, Medicare 
Home Health Agency Manual, Pub. 11, section 204.2(F).   A plan of care is the medical 
treatment plan that contains all diagnoses, types of services, supplies, and equipment 
required; the frequency of visits to be made; and  all medication and treatments.   
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Coverage and Payment of Home Health Services 
States must  offer home health services to Medicaid beneficiaries who 
meet the States criteria for nursing home coverage.3 Under the home  
health benefit, States must provide medical supplies and assistive 
services.4 States may provide therapeutic services at their option.5 All 
five States included in this study provided therapeutic services during 
the period of our review.    
For medical supplies and services Medicaid covers, Medicaid . . . will 
take all reasonable measures to ascertain the legal liability for third 
parties . . . to pay for care and services available under the plan. . . .6   
Medicare qualifies as a third-party payor as defined above, and 
Medicaid should always be the payor of last resort. 
For the five  States included in our review, Tables 1 and 2 (next page) 
present total Medicaid claims and expenditures  for home health 
supplies and services coverable by both Medicaid and Medicare in 
2005.7 Medicaid paid a total of $184 million for 2.2 million claims for 
these supplies and services ($37.2 million for nonroutine medical 
supplies, $75.6 million for therapeutic services, and $71.8 million for 
routine supplies). Excluded from these totals are supplies and services  
that Medicaid home health programs covered but that the Medicare 
Prospective Payment System (PPS) did not cover. The 2.2 million 
claims were for all beneficiaries regardless of dual eligibility.8  
To be covered as part of the Medicare home health benefit, services 
must be reasonable, medically necessary, and specified on a plan of 
care.9 Other than these requirements, Medicare does not limit the 
amount of nonroutine medical supplies or therapeutic services that a 
 
3 Social Security Act (the Act)  1902(a)(10)(D). 

4 42 CFR  441.15. 

5 Section 1905(a)(7) of the Act, 42 CFR  440.70 and 441.15. 

6 Section 1902(a)(25)(A) of the Act. 

7 We define coverable supplies and services as those that Medicare could pay if the 
 
beneficiary  was dually eligible; however, as noted in the Methodology section, our 

population  was not restricted to beneficiaries identified as dually eligible on Medicaid 
 
claims and included all supplies and services paid by Medicaid regardless of whether the 

beneficiary was identified as dually eligible. 

8 Maryland enrolls all home health beneficiaries in managed care programs, except for 

dually eligible beneficiaries. Thus, Marylands fee-for-service expenditures represent 

only expenditures for dually eligible beneficiaries. 

9 CMS. Medicare Home Health Agency  Manual, Pub. 11, sections 203.1(A) and 

203.1(B). 

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I N T R O D U C T I O N   
beneficiary can receive through the home health benefit. Nonroutine 
medical supplies include items such as catheters, dressings, syringes, 
and needles.    
    
Table 1:  Medicaid Claims and Expenditures for Home Health Nonroutine  
Medical Supplies and Therapeutic Services Coverable by Both Medicaid 
and Medicare for All Medicaid Beneficiaries in 2005 
Therapeutic  Therapeutic 
Nonroutine Medical   Nonroutine Medical  
State  Services   Services 
Supplies (Dollars)  Supplies (Claims) 
(Dollars)  (Claims) 
Florida  $10,902,160  103,382  $3,436,109  51,397 
Maryland  $5,333  136  $53,304  1,239 
North Carolina  $3,170,079  90,659  $7,750,288  77,631 
Ohio  $9,765,963  90,241  $12,847,646  184,593 
Texas  $13,351,263  547,933  $51,554,385  403,037
   Total  $37,194,798  832,351  $75,641,733  717,897 
Source:  Office of Inspector General analysis of State Medicaid claims data, 2007. 
Medicare also covers routine medical supplies used in small quantities, 
such as cotton balls, gloves, and incontinence items, when they are 
provided during the course of a therapeutic or assistive home health 
service.  For the five States included in our review, Table 2 presents  
total Medicaid claims and expenditures for home health routine medical 
supplies.  See  Appendix A for further details on Medicare coverage rules  
for medical supplies.   
 
Table 2:  Medicaid Claims and Expenditures for Home Health  
 
Routine Medical Supplies Coverable by Both Medicaid and 
Medicare for All Medicaid Beneficiaries in 2005 
 
  Routine Medical Supplies  Routine Medical Supplies 
State 
(Dollars)  (Claims) 
 
Florida  $2,173  37 
Maryland  $0  $0 
North Carolina  $11,053,572  91,890 
Ohio  $1,068  7 
Texas  $60,782,007  551,527
   Total  $71,838,820  643,461 
Source:  Office of Inspector General analysis of State Medicaid claims data, 2007. 
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The Centers for Medicare & Medicaid Services (CMS) maintains a list of 
the services that Medicare covers and codes to be used in billing for 
them. This list is publicly available on the CMS Web site and is 
updated annually. Medicare contractors are notified of these updates 
through program memorandums.10   
Effective October 1, 2000, Medicare  began paying for home health 
services through a PPS. Under the Medicare home health PPS, home  
health providers are paid for all home health services provided to 
eligible beneficiaries during each 60-day episode of care, provided that 
the services  meet coverage criteria.   The Medicare payment for each 
episode of care may be split into two portions; home health providers 
typically receive approximately half the payment at the beginning of 
each episode and the balance at the  end of the episode. 
Dually  Eligible Beneficiaries and Home Health Payments  
As of January 1, 2006, CMS data indicated that approximately 
6.1 million individuals were dually eligible for both Medicaid and 
Medicare.11   Dual eligibility occurs when an individual meets both 
Medicaid and Medicare eligibility requirements. When both Medicare 
and Medicaid cover a particular supply or service, Medicare should pay 
first for services provided to dually eligible beneficiaries. Medicaid is 
the payor of last resort and therefore pays only for services that are 
covered by Medicaid but not covered by Medicare.    
Previous Studies and Related Work 
A 2005 Office of Inspector General (OIG) study entitled Review of 
Medicaid Home Health Payments Rendered During a Medicare Covered 
Stay for Dual-Eligible BeneficiariesState of Connecticut 
(A-01-04-00011), identified $1.8 million in Medicaid payments for 
Medicare-paid services from 2001 to 2003. 
CMS is conducting two projects to identify duplicate Medicaid and  
Medicare payments. CMS began the Medi-Medi project in 2001 to 
reduce fraud, waste, and abuse by matching Medicaid and Medicare  
data to identify improper billing and utilization patterns. Medi-Medi is 
 
10 Home Health Consolidated Billing Master Code List. Available online at 

http://www.cms.hhs.gov/HomeHealthPPS/03_coding&billing.asp. Accessed 

November 6, 2007. 

11 Overview of the Many Steps That CMS Has Taken To Make Sure All Dual Eligibles 
Have Medicare Prescription Drug Coverage, January 1, 2006. Retrieved online at 
http://cms.hhs.gov. Accessed on August 16, 2006; no longer available online. 
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I N T R O D U C T I O N   
 
currently reviewing claims in 10 States: California, Florida, Illinois, 
New Jersey, New York, North Carolina, Ohio, Pennsylvania, Texas, and 
Washington.  When we conducted our analysis, Medi-Medi had not yet 
reviewed any home health claims in the States included in this study.12   
A pilot program streamlining States third-party liability efforts is 
underway in Connecticut, Massachusetts, and New York.  In this 
program, the Regional Home Health Intermediary reviews samples of 
Medicaid claims to determine whether Medicare should have paid them.  
If Medicare is identified as the appropriate payor, States receive 
refunds of their Medicaid payments from CMS.   
METHODOLOGY 
State Selection 
We  examined Medicaid and Medicare claims for beneficiaries in 
five States: Florida, Maryland, North Carolina, Ohio, and Texas.  We 
selected States that represented fee-for-service Medicaid expenditures 
for home health services in 2004 ranging from $58,000 to $126 million.  
To avoid  overlapping with the efforts of the Regional Home Health 
Intermediary, we avoided selecting States that were participating in 
that pilot program. 
State Medicaid Agencies  
We conducted structured interviews with Medicaid agency staff in each 
of the five selected States.  During these interviews, we collected 
information and requested documentation regarding the home health 
services that each State provided through its Medicaid program.  We 
also collected information on the postpayment audits that each State 
conducted and the controls that each State had in place intended to 
prevent Medicaid payments for home health services that Medicare 
paid. 
Claims Data and Analysis  
Medicaid Data. We collected all final-action Medicaid Management 
Information System claims data for home health services in the 
five selected States for 2005.  From these data, we extracted beneficiary 
identifiers, service dates, procedure codes, and payment amounts for all 
claims. A lack of complete Medicare eligibility indicators in the 
 
12  Florida, North Carolina, Ohio, and Texas were included in our study and are 
participating in Medi-Medi. 
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Medicaid claims data prevented us from  calculating expenditures for 
only the dually eligible population. 
Medicare Data. We used the National Claims History file to identify paid  
Medicare claims data representing  episodes of care provided to 
beneficiaries in the five selected States for 2005. From these data, we 
extracted Health Insurance Claims Numbers (HICN) and service dates for 
all paid episodes and matched the HICNs from the claims against the 
Enrollment Database13 to obtain each beneficiarys Social Security 
number.    
Medicaid-Medicare Data Match.   We matched claims for all beneficiaries  
who had home health claims, rather than limiting our data collection to  
beneficiaries with dual eligibility indicators, to ensure that we captured  
all beneficiaries receiving services that both programs paid for 
regardless of whether the indicator was present. Because Medicare 
covers routine medical supplies provided during the course  of a 
therapeutic or assistive service, we determined how many of  the routine  
supply claims fell on dates on which the beneficiaries also received 
therapeutic or assistive services.14    
In each of the five selected States, we did the following: 
(1) We merged the Medicaid  home health claims with the Medicare 
home health claims using Social Security numbers. The Medicaid 
claims had either specific service dates or date ranges, while the 
Medicare claims always had date ranges. The  Medicaid dates and 
date ranges were matched against the Medicare date ranges for each 
beneficiary to identify potential duplicate claims.  We then excluded  
any claims for services not covered under the PPS, because Medicaid 
payments for such services would not be duplicative.  
(2)  We identified paid claims for Medicaid medical supplies and services 
that occurred within Medicare episodes of care,  analyzed payment 
trends for types of services and dates of payments, and calculated  
 
13 The CMS Enrollment Database contains current and historical Medicare enrollment 

and entitlement information  for all beneficiaries ever enrolled.
  
14 For this review, our only examination of assistive services was related to dates of 
 
service so that we could  determine whether routine supply claims fell on the same dates 

as assistive services and therefore were likely covered by Medicare. 

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 I N T R O D U C T I O N   
 
duplicate payment amounts.15  We also reviewed the dates of claims 
submission, receipt, and payment from each provider to determine 
temporal relationships between  Medicaid and Medicare claims. 
(3) We conducted conference calls with the selected  States to inquire 
about the reasons for duplicate payments.  We  also spoke with CMS 
officials to verify policy. 
Limitations 
This study was limited to fee-for-service Medicaid and Medicare PPS 
payments for the same home health  medical supplies and therapeutic 
services.  We did not attempt to determine the medical necessity or 
appropriateness of any of the services provided, nor did we review the 
beneficiaries plans of care.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
 
15 For the purposes of this study,  we define a duplicate payment as any Medicaid  
payment for a PPS-covered therapeutic service or nonroutine  medical supply on  a date  
falling within a Medicare episode of care. 
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  F I N D I N G S  
In four of the five States reviewed, Medicaid  Four of the five States included in 
inappropriately paid a combined $1 million in  our review made $1 million in 
Medicaid payments for 
2005 for nonroutine medical supplies and 
84,061 claims in 2005 for 
therapeutic services that were paid by Medicare  
nonroutine medical supplies 
and/or therapeutic services that were paid by Medicare.  Maryland had 
no inappropriately paid claims.  These payments represent nearly 
1 percent of the $113 million that these States spent on reviewed home 
health nonroutine medical supplies and therapeutic services, and  
6 percent of the 1.5 million total claims.16    
All inappropriately paid claims were  for supplies and services included 
on the publicly available list of Medicare-covered PPS services for 2005.  
Of these inappropriately paid claims, 98 percent  were for nonroutine  
medical supplies, and 2 percent were for therapeutic services.  Texas 
represented 58 percent of the total expenditures for home health 
nonroutine medical supplies and therapeutic services that we reviewed, 
but 89 percent of the total dollars inappropriately paid.  
States inappropriately paid $802,039 for 82,081 claims for nonroutine 
medical supplies 
Texas accounted for 96 percent of the inappropriate expenditures for 
nonroutine medical supplies, followed by North Carolina and Florida 
(see Table 3 on the following page).  Of Texass  nonroutine claims, 
92 percent were billed with procedure code A4335 (nonroutine 
incontinence supplies).  
Texas officials stated that a claims-level review would be the only way 
to determine why it had a disproportionate number of inappropriately 
paid medical supply claims when compared to those of the other four 
States. Texas did, however, lack indicators of dual eligibility for more 
than 99 percent of its inappropriately paid claims.  Texas officials stated 
that Medicare or other third-party liability information may have been 
added to the eligibility file after the claims were paid.  
 
 
 
16  These percentages should not be interpreted as error rates.  As explained in the  
methodology,  we are unable to determine total expenditures or total claims for only the 
dually eligible population.  The percentages above represent proportions of total 
expenditures and claims for Medicare-coverable services for all beneficiaries, not dually  
eligible beneficiaries only. 
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F I N D I N G S  

 
Table 3:  Inappropriately Paid Medicaid  
 
Nonroutine Medical Supplies 
 
 
State  Dollars  Claims 
 
  Florida  $16,009  212 
  Maryland  $0  0 
 
North Carolina  $15,847  450 
 
  Ohio  $0  0 
 
Texas  $770,183  81,419
 
   Total  $802,039  82,081 
 
Source:  OIG analysis of State Medicaid claims data, 2007. 
 
States inappropriately paid $219,125 for 1,980 claims for therapeutic 
services  
Ohio and Texas accounted for 93 percent of the inappropriate 
expenditures for therapeutic services, with North Carolina paying 
7 percent of the identified inappropriate payments (see Table 4 below).  
Sixty-six percent of the identified therapeutic services were for physical 
therapy; Ohio accounted for 63 percent of the inappropriate 
expenditures for physical therapy claims.  Ohio, Texas, and North  
Carolina used local codes for billing physical therapy claims.  Although 
these were not the same as the codes included  on the listing of Medicare  
PPS covered services, Medicare covers all therapeutic services provided 
to a beneficiary during home health episodes irrespective of the code  
used to bill that service.  Thus, the Medicaid payments for these claims 
are duplicative. 
Table 4:  Inappropriately Paid Medicaid 
Therapeutic Service Claims 
State  Dollars  Claims 
Florida  $0  0 
Maryland  $0  0 
North Carolina  $14,891  149 
Ohio  $67,694  967 
Texas  $136,540  864
   Total  $219,125  1,980 
Source:  OIG analysis of State Medicaid claims data, 2007. 
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Two States paid $6.6 million 
Medicaid paid $6.6 million for routine supplies 
for 74,648 claims for routine 
on the same dates as home health services;  
medical supplies on the 
Medicare coverage of routine supplies cannot  same dates as therapeutic or 
be determined from claims data  assistive services. Texas 
represented 85 percent of 
the total expenditures for home health routine  medical supplies, but 
accounted for 98 percent of the expenditures for  these claims (see Table 
5 below). All of these claims were for various sizes of incontinence briefs 
and liners, which are typically covered by Medicare as routine medical 
supplies. Because Medicare PPS covers the cost of routine medical 
supplies that are customarily used in small quantities during the course  
of a therapeutic or assistive home health service, it is possible that 
these medical supplies were included in the Medicare payment and 
Medicaid should not have paid for them. However, claims data do not 
specify whether a routine supply was provided during the course of a 
therapeutic or assistive service or just on the same day as a service.  
Therefore, without reviewing medical records, neither OIG nor the State 
Medicaid programs can determine whether these medical supplies were 
in fact provided during the course  of a therapeutic or assistive service.17      
Table 5:  Paid Medicaid Claims  for  Routine  
Medical Supplies  on  the Same  Dates as Home  
Health Services 
State  Amount Paid  Number of Claims 
Florida  $0  0 
Maryland  $0  0 
North Carolina  $164,231  1,780 
Ohio  $0  0 
Texas  $6,486,272  72,868
   Total  $6,650,503  74,648 
Source:  OIG analysis  of State  Medicaid claims data,  2007. 
States paid an additional $8.3 million for 93,082 claims for routine 
medical supplies that home health providers billed during Medicare 
episodes of care but that did not fall on the same  dates as therapeutic or  
assistive services. The Medicare Benefit Policy  Manual states, There  
 
17 Reviewing  medical records was outside the scope of this study.  
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FF II NN DD II NN GG SS  
are occasions when [routine supplies] would be considered nonroutine 
and thus would be considered a billable supply, i.e., if they are required  
in quantity, for recurring need, and are included in the plan of care.18   
However, the Manual does not define required in quantity or 
recurring need with respect to whether routine supplies should be 
considered nonroutine. Lacking this definition, OIG cannot determine 
whether any or all of these claims should have been covered by  
Medicare as nonroutine supplies. 
 
Prior to our  review, all five States 
All States reported having controls to prevent 
had established payment system 
duplicate payments, but these did not eliminate 
edits to compare claims for home  
all inappropriate payments 
health services to Medicare 
eligibility information. However, incomplete eligibility information and 
payment system edit overrides may still allow inappropriate payments. 
States reported problems with eligibility  information 
Medicare eligibility information was incomplete on many 
inappropriately paid claims. As previously stated, more than 99 percent 
of the inappropriately paid claims for Texas did not have a Medicare 
eligibility indicator populatedthe field was empty. Maryland reported 
that the Medicare eligibility data may not indicate that a beneficiary 
became eligible for Medicare until a  year after Medicare coverage began.   
CMS officials confirmed that because of retroactive eligibility 
determinations, Medicare eligibility data may not be up-to-date. 
States payment systems may allow payment despite Medicare eligibility  
Even when Medicare eligibility information was complete and correct,  
payment system edits failed to prevent some duplicate payments from  
being made. In North Carolina, 98 percent of inappropriately paid  
claims were for beneficiaries with Medicare eligibility indicators 
correctly populated. Home health providers in  North Carolina can 
insert condition codes on claims to override the need for a Medicare 
denial when Medicaid criteria are met (e.g., beneficiary is receiving 
incontinence supplies but no therapeutic or assistive services). 
Providers must have documentation supporting the override  available 
 
18 CMS. Medicare Benefit Policy Manual, Pub. 100-02, Chapter 7, section 50.4.1.2(E). 
See Appendix A for further details on the definitions of nonroutine and routine supplies. 
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upon request.19 This may explain how the claims in North Carolina 
that correctly indicated the beneficiaries eligibility for Medicare were 
paid; however, we did not request data on what claims providers 
overrode. A similar process exists in Ohio; if Medicare eligibility is 
indicated for a beneficiary, the provider may submit an appropriate 
adjustment code for Medicaid to process the claim. 
 
Officials in the reviewed  States 
Despite Medicaid being the payor of last resort, 
indicated that they did not have 
State officials reported that they  lacked direct 
direct access to Medicare PPS 
access to Medicare claims data  to determine 
payment data, which would 
whether Medicare had already paid  provide information about 
whether and when a beneficiary 
was receiving Medicare-paid services. Most inappropriately paid claims  
were likely paid after Medicare made the initial payments for episodes, 
and Medicaid paid 10 percent of inappropriate claims after the final 
Medicare payment. At the time  of our review, States lacked  direct 
access to Medicare claims data. If States had direct access, they would 
be able to determine whether a beneficiary has an open episode of care  
before processing a Medicaid home health service claim.    
The order of claims submission dates and dates of payment indicates 
that some home health providers are submitting Medicaid claims for 
medical supplies and therapeutic services when they have already 
received Medicare payments. This may be true  for many  
inappropriately paid Medicaid claims, given that Medicare makes both 
an initial and a final payment for each 60-day episode of care. Providers  
submitting Medicaid claims during open episodes of care  may have 
already received the initial Medicare payments for those episodes. 
Maryland and Florida, which had fewer claims paid in error compared 
to the other States reviewed, require home health providers to show  
that Medicare denied the claims for beneficiaries with Medicare 
eligibility information before Medicaid pays. Ohio does not  require a 
denial of payment notice; however, it does require providers to submit  
claims for dually eligible beneficiaries to Medicaid with adjustment 
 
19 In many cases, overriding the denials may be appropriate because Medicaid often 
covers services that Medicare does not. However, it is also possible that providers may     
override denials to collect additional Medicaid payments. 
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F I N D I N G S  
codes showing why payment is due (e.g., Medicare denied the claim).20   
The majority of claims that Medicaid paid during and after Medicare  
episodes of care occurred in Texas, where the Medicaid program does 
not require a denial of payment notice from Medicare.  North Carolina 
also does not require a denial of payment notice  from Medicare.    
 
20  In limited circumstances, Ohio allows Medicaid payments for dually eligible 
beneficiaries without adjustment codesfor instance, if the provider has previously billed  
Medicare for the service and has documentation showing that Medicare previously denied  
the payment. 
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  R E C O M M E N D A T I O N S  
Our results show that Medicaid inappropriately paid for some supplies 
and therapeutic services for which Medicare had paid.  In 2005, the five 
States reviewed made $1 million in inappropriate Medicaid payments to 
home health agencies for therapeutic services and nonroutine medical 
supplies; two State Medicaid programs paid another $6.6 million for 
routine medical supplies on the same dates as Medicare-covered home  
health services, but it is not possible to determine from the claims data 
alone whether these payments were  appropriate.  Although all States 
had controls in place to prevent duplicate payments, these controls did 
not prevent all inappropriate payments.  Further, States reported that 
they lacked direct access to Medicare claims data to determine whether  
Medicare had already paid.  As a result, despite  Medicaid being the  
payor of last resort, Medicaid likely made most of the inappropriate 
home health payments after the initial Medicare payments and  
10 percent of the inappropriate payments after  the final Medicare 
payments.  
We recommend that CMS: 
Ensure That Medicaid Does Not Pay  Providers for Medicare-Paid Nonroutine  
Medical Supplies and Therapeutic Services  
CMS could accomplish this through:    
 	  working with States and Regional Home Health Intermediaries to 
determine the costs and benefits of requiring providers to request 
from Medicare denial of  payment notices that would then be  
submitted to the Medicaid program, 
 	  investigating and addressing the causes of States incomplete 
Medicare eligibility data,  
 	  working with States to determine the utility of allowing providers to 
override Medicaid denials for home  health services for dually eligible 
beneficiaries, 
 	  requesting States to reeducate providers on the requirement that 
Medicaid be the payor of last resort and that Medicaid not be billed 
for services that Medicare covers, and 
 	  making current Medicare home health payment information 
available directly to States to allow States to determine whether 
Medicaid providers are billing for beneficiaries during 
Medicare-covered home  health episodes of care.    
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R E C O M M E N D A T I O N S  
Clarify CMS Policy on Medicare PPS Coverage of Routine Medical Supplies   
CMS should clarify what constitutes Medicare-covered routine medical 
supplies used in the course of a therapeutic or assistive service and  
provide greater specificity on when routine medical supplies are paid for 
under Medicare PPS.   Specifically, definitions of required in  quantity 
and recurring need with respect to whether routine supplies should be 
considered nonroutine are needed.   
 
We note that this review was conducted as a statistical match of 
 
computerized data.  Under the provisions of the Computer Matching and  
Pr ivacy Protection Act of 1988, we cannot forward the results to CMS or the 
States for collection of the inappropriate payments. 
 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
In its written comments on the report, CMS stated that it did not 
disagree with our first recommendation and recognized the  importance  
of preventing duplicate Medicaid and Medicare billings.  CMS offered 
what it believes is a simplification of one of our suggestions to address 
the first recommendation, which involves Medicare sending a copy of 
the denial of payment notice to the State Medicaid program.  CMS 
concurred with our second recommendation to clarify the policy on  
coverage of routine medical supplies under Medicares home health 
PPS. 
CMS commented on the methodology of this review, stating that the 
absence of medical record review  or further analysis of potential 
duplicate payments limits the findings.  Medical record review and 
follow-up analysis could provide additional useful information about 
inappropriate payments.  However,  our claims analysis was sufficient to 
definitively identify $1 million in inappropriate Medicaid payments, as 
well as to identify vulnerabilities that CMS should address to prevent 
duplicate payments.   
CMS also stated that our second finding is an assumption rather than 
fact. Our second finding, which states that Medicaid paid $6.6 million 
for routine supplies on the same dates as home health services, is 
factual. We  make no assumption about whether these payments were  
inappropriate.  As stated in the finding, . . . without reviewing medical 
records, neither OIG nor the State Medicaid programs can determine 
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R E C O M M E N D A T I O N S  
whether these medical supplies were in fact provided during the course 
of a therapeutic or assistive service. 
CMS stated that the Medicaid and Medicare matches were not exact.   
The nature  of PPS payments, which include all supplies and services 
that Medicare covers, makes it impossible to find one-to-one matches  
between Medicaid and Medicare payments.  As described in our 
methodology, it is nonetheless possible to identify duplicate payments 
using these matches.  
CMS also stated that we were unable to calculate expenditures for only  
the dually eligible population.  The lack of accurate dual eligibility 
indicators on claims data makes this calculation impossible.  
Consequently, our first recommendation suggests that CMS investigate 
and address the causes of States incomplete Medicare eligibility data. 
Finally, CMS requested further elaboration on Marylands success  in 
preventing duplicate payments for home health services.  Our 
discussions with Maryland Medicaid officials did not reveal any 
significant differences between their efforts to prevent duplicate 
payments and the efforts of the other four States reviewed.  Marylands 
lack of inappropriate payments is  due most likely to the significantly 
smaller number of beneficiaries who were receiving services paid by 
both Medicaid and Medicare rather than differences in States 
prevention efforts. 
We made technical corrections to the report based on CMSs comments.  
The full text of CMSs comments is provided in Appendix B. 
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  A P P E N D I X   ~   A    
Medicare Coverage of Nonroutine and Routine Medical Supplies 
 
Medicare covers nonroutine medical supplies under the following 
conditions: (1) the home health agency follows a  consistent charging 
practice for  Medicare and other patients receiving the item, (2) the item  
is directly identifiable to an individual patient, (3) the cost of the item 
can be identified and accumulated separately from other services, and  
(4) the item is furnished  at the direction of the patients physician and is 
specifically identified in the plan of care.  Examples of nonroutine 
medical supplies include catheter supplies, dressings, syringes, needles,  
and certain incontinence supplies.21   
Routine medical supplies are defined as those that are customarily used  
in small quantities during the course of most home care visits, which 
are usually included in the staffs supplies and not designated for a 
specific patient.  Routine medical supplies are included in Medicare 
Prospective Payment System if they are provided during the  course  of a 
therapeutic or assistive service (i.e., a physical therapy or skilled 
nursing visit).  Examples of routine medical supplies include gloves, 
cotton balls, and certain incontinence supplies.  If a supply that is 
normally considered routine is required in quantity for recurring need 
and is specified in the plan of care, it may be considered a nonroutine  
supply. 22  
 
 
21 Centers for Medicare & Medicaid Services (CMS).  Medicare Benefit Policy Manual, 

Pub 100-02, Chapter 7, section 50.4.1.3. 

22 CMS. Medicare Benefit Policy Manual, Pub 100-02, Chapter 7, section 50.4.1.2. 

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  A P P E N D I X   ~   B
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A P P E N D I X   B  
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A P P E N D I X   B  
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  A C K N O W L E D G M E N T S
This report was prepared under the direction of Brian T. Pattison, 
Regional Inspector General for Evaluation and Inspections in the 
Kansas City regional office.   
Brian Whitley served as the team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the Kansas City regional  
office who contributed to the report include Michael Barrett,  Michala 
Walker, and Julie Dusold; central office staff who contributed include 
Scott Horning, Kevin Manley, and Jennifer Jones.  
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