DEPARTivlENT OF H EALTH AND H UMAJ.'{ SERVICE~ 
OFFICE OF INSPECTOR GENERAL 
WAS!l!NC;T ON, DC  20201 
MAY 0 3 2013 
TO: 	 Marilyn Tavenner 
Acting Administrator 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright. 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Medicare Payments for Part B Claims with 
G Modifiers, OEI-02-10-00160 
This memorandum report describes Medicare payments for Part B claims with 
G modifiers and how contractors process claims with these modifiers.  Providers and 
suppliers use four G modifiers to indicate why claims may not be covered by Medicare. 
Providers file such claims when they need to document the use of services or items, or to 
provide information that may be required by other payers.  Providers and suppliers use 
GA and GZ modifiers to indicate that they expect Medicare to deny the service or item as 
not "reasonable and necessary."  For example, they may use these modifiers when they 
are unsure whether a beneficiary has reached a frequency limit that applies to certain 
services or items.  Providers and suppliers use GY and GX modifiers to indicate that 
services or items are not covered by Medicare. 
SUMMARY 
In 2011, Medicare paid nearly $744 million for Part B claims with G modifiers that 
providers expected to be denied as not reasonable and necessary or as not being covered 
by Medicare .  We found vulnerabilities in how Medicare pays for these claims.  When 
processing claims, contractors often do not consider the modifiers that providers use to 
indicate that they expect the services or items to be denied as not reasonable and 
necessary.  Contractors also do not always consider the modifiers that providers use to 
indicate that services or items are not covered by Medicare.  Although contractors have 
checks that affect some of these claims, such as determining whether the services and 
items met Medicare frequency limitations, they do not specifically check for claims for 
which providers expect not to be paid.  Further, we found that from 2002 to 2011, 
Medicare paid $4.1 million for claims that included inappropriate combinations of 
G modifiers. 
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160)  Page 2  Marilyn Tavenner 
 
BACKGROUND 
 
Medicare Part B covers a variety of services and items, including physician office visits, 
outpatient procedures, laboratory tests, and durable medical equipment, prosthetics, 
orthotics, and supplies (DMEPOS).  Covered services and items must be reasonable and 
necessary for the diagnosis or treatment of illness or injury, or to improve the functioning 
of a malformed body part.1  As discussed in more detail below, providers and suppliers 
use G modifiers to alert Medicare when they bill for services or items that they expect to 
be denied as either not reasonable and necessary (GA and GZ modifiers) or because they 
are not covered by Medicare (GY and GX modifiers).   
 
In a 2009 report, the Office of Inspector General (OIG) raised concerns about the use of 
GA and GZ modifiers and about Medicare inappropriately paying for some claims with 
these modifiers.  The report looked at claims for pressure-reducing support surfaces and 
found that Medicare paid for 72 percent of all pressure-reducing support surface claims 
with GA or GZ modifiers.2  This amounted to over $4 million in potentially inappropriate 
payments. 
 
GA and GZ Modifiers 
Providers and suppliers use GA and GZ modifiers to bill for certain services or items that 
they expect to be denied as not reasonable and necessary.3  They may use these modifiers 
when they are uncertain about whether a claim should be paid.  For example, a provider 
may not know whether a beneficiary already had a particular laboratory test that 
Medicare covers only once a year 4 or a supplier may suspect that the beneficiary already 
has the item it is providing.5  Providers and suppliers may also use these modifiers when 
they are certain that the claim should not be paid.  For example, a provider may know 
that Medicare does not pay for a particular test for a beneficiary with a given condition, 
but because the beneficiary requests it, the provider submits the claim to Medicare for a 
decision.6  The beneficiary may need Medicare to deny the claim so that it can be 
submitted to the beneficiarys secondary insurance.   
 
                                                 
1 Social Security Act  1862(a)(1)(A), 42 U.S.C.  1395y(a)(1)(A). 
2 OIG, Vulnerabilities in Medicare Payments for Pressure Reducing Support Surfaces, OEI-02-07-00421, 
December 2009. 
3 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, 20.9.1.1(E).  The requirements 
concerning these modifiers also apply to Part B claims submitted by Part A providers.  See CMS, Medicare 
Claims Processing Manual, Pub. No. 100-04, ch.1,  60.4.2. 
4 Medicare may not pay on a claim if it represents a test that exceeds a frequency limit.  See CMS, Advance 
Beneficiary Notice of Noncoverage (ABN):  Part A and Part B, May 2012.  Accessed at 
http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network -
MLN/MLNProducts/downloads/abn_booklet_icn006266.pdf on April 1, 2013. 
5 See e.g., Noridian Administrative Services LLC, Proper Use of GY, GA, and GZ Modifiers, 
Happenings, August 2007.  Accessed at 
https://www.noridianmedicare.com/dme/news/bulletins/happenings/issue6_aug07.pdf on February 14, 
2011.    
6 This type of claim is called a demand bill.  See CMS, Medicare Claims Processing Manual, 
Pub. No. 100-04, ch. 1,  60.3.2(B). 
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
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GA Modifiers:  Beginning in January 2002, Medicare required providers and suppliers to 
use the GA modifier for claims they expect to be denied as not reasonable and necessary 
for which they have on file an Advance Beneficiary Notice (ABN) signed by the 
beneficiary.  One of the purposes of the ABN is to inform the beneficiary that Medicare 
certainly or probably will not pay for the service or item on that occasion.  The 
GA modifier may be used only if a beneficiary signed an ABN indicating that he or she 
accepts liability for the cost of the service or item if Medicare does not pay for it.  
Medicare prohibits the routine use of ABNs.  However, it does allow for certain 
exceptions, such as when a service or item has a frequency limit on coverage.7  For 
example, laboratories may routinely use ABNs because Medicare places frequency 
limitations on many laboratory services and laboratories may not be able to determine 
whether a beneficiary has already exceeded the limit for a test.   
 
GZ Modifiers:  Beginning in January 2002, Medicare required providers and suppliers to 
use the GZ modifier for claims they expect to be denied as not reasonable and necessary 
for which they do not have an ABN on file.8  In these cases, if Medicare denies the claim 
as not reasonable and necessary, the beneficiary cannot be held liable for the cost of the 
service or item.  Table 1 provides the definitions of GA and GZ modifiers for Part B 
claims. 
 
Table 1:  Definitions of GA and GZ Modifiers for Part B Claims 
Modifier  Definition 
GA  Service or item is not considered reasonable and necessary; ABN is on file 
GZ  Service or item is not considered reasonable and necessary; ABN is not on file 
Source:  CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23,  20.9.1.1(E). 
 
GY and GX Modifiers 
Beginning in January 2002, Medicare allowed providers and suppliers to use the 
GY modifier to indicate that a service or item is not covered by Medicare, either because 
it is statutorily excluded (e.g., hearing aids) or does not meet the definition of any 
Medicare benefit (e.g., surgical dressings that are used to clean or protect intact skin).9  
Because Medicare does not cover these services or items, the beneficiary is liable for 
payment.  No ABN is required with the GY modifier.  The provider or supplier may use 
this modifier when a beneficiary needs Medicare to deny the claim so that it can be 
submitted to the beneficiarys secondary insurance. 
   
In April 2010, Medicare established the GX modifier.  It indicates that a service or item is 
statutorily excluded and that the provider or supplier voluntarily gave the beneficiary an 
                                                 
7 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 30,  40.3.6 and 40.3.6.4(C).  
8 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23,  20.9.1.1(E). 
9 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23,  20.9.1.1(E).  The requirements 
concerning these modifiers also apply to Part B claims submitted by Part A providers.  See CMS, Medicare 
Claims Processing Manual, Pub. No. 100-04, ch.1,  60.4.2.  
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
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ABN.10  In 2010, Medicare provided instructions to contractors to automatically deny 
Part A claims with the GX modifier for noncovered charges.11  Medicare has not issued 
similar instructions for Part B claims.  Table 2 provides the definitions of GY and 
GX modifiers.   
 
Table 2:  Definitions of GY and GX Modifiers for Part B Claims 
Modifier  Definition 
Service or item is statutorily excluded or does not meet the definition of any 
GY  Medicare benefit; ABN is not required.   
Service or item is statutorily excluded and the provider or supplier voluntarily 
GX  notified the beneficiary with an ABN.  
Source:  CMS Program Memorandum, CR 1820; CMS, Medicare Claims Processing Manual, Pub. No. 100-04,  
ch. 23,  20.9.1.1(E). 
 
Medicare Part B Claims Processing  
CMS contracts with Medicare Administrative Contractors (MAC) to process and pay 
Part B claims.12  These contractors also apply claims processing editsi.e., system 
checksto prevent improper payments; conduct medical reviews and data analyses of 
claims; and conduct outreach and education to providers.  Edits flag a claim for automatic 
denial or for contractor review to ensure that the claim is appropriate.   
 
CMS provides contractors with various instructions about how to process claims with 
G modifiers.  CMS required contractors to automatically deny claims with GZ modifiers 
for services or items that were provided on or after July 1, 2011.13  Currently, CMS does 
not have any specific instructions for claims with GA modifiers, except for those 
submitted with both a GA and GZ modifier; CMS instructs contractors to treat such 
claims as unprocessable.14  For claims with GY modifiers, CMS allows contractors to 
deny these claims at their discretion.  Finally, CMS has not issued instructions for 
processing Part B claims with GX modifiers.  See Table 3. 
 
Table 3:  Processing Instructions for Part B Claims With G Modifiers 
Modifier  Processing Instructions 
Claims with both a GA and a GZ modifier for the same service or item should be treated 
GA  as unprocessable. 
GZ  Effective July 1, 2011, GZ claims must be automatically denied.   
Effective January 2002, claims with GY modifiers may be automatically denied at the 
GY  discretion of the MACs. 
GX  No instructions.  
Source:  CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23,  20.9.1.1(E)(5) and (F). 
                                                 
10 CMS, CR 6563, Transmittal 1921, Billing for Services Related to Voluntary Uses of Advanced 
Beneficiary Notices of Noncoverage (ABNs), February 19, 2010. 
11 Ibid., Requirement Number 6563.5. 
12 During the period of our review, CMS was transitioning the claims processing workload of other 
contractorssuch as carriers and fiscal intermediariesto the MACs.   
13 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23,  20.9.1.1(F). 
14 Ibid., ch. 1,  20.9.1.1(E)(5). 
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
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METHODOLOGY 
 
This study is based on an analysis of all Part B claims, including DMEPOS claims, with 
GA, GZ, GX, and GY modifiers for calendar year 2011.  It is also based on structured 
interviews with staff at CMS and selected claims processing contractors.  
 
Analysis of Part B claims.  Using CMSs National Claims History File and Standard 
Analytical File, we analyzed all Part B claims with GA, GZ, GX, or GY modifiers from 
2011.15  We determined the number of claims with each of these modifiers, the number 
and percentage of these claims that Medicare paid, and the total amount Medicare paid 
for these claims.  We also analyzed the services or items that were billed on these claims.  
We determined the types of services or items that had the largest numbers of paid claims 
and the amounts Medicare paid for each of these services or items.   
 
Next, we analyzed the number of paid claims that included inappropriate combinations of 
G modifiers.  We did this analysis for all Part B claims with GA, GZ, GX, or 
GY modifiers from 2002 to 2011.  We looked for combinations that represent 
inappropriate scenarios, such as when one modifier indicates that a service or item is not 
reasonable and necessary and the other modifier indicates that Medicare does not cover 
the service or item.  For the purposes of this report, we use providers to refer to both 
providers and suppliers.  
 
Interviews with CMS staff and selected contractors.  We conducted structured 
interviews with staff at CMS and selected claims processing contractors about how they 
use G modifiers.  We also asked staff at each contractor whether they have any claims 
processing edits specific to claims with G modifiers and under what circumstances they 
review these claims.  During the period of our review, CMS was transitioning the claims 
processing workload of other contractors, called carriers, to the MACs.  For this review, 
we interviewed staff at the 13 MACs; these contractors processed 78 percent of all paid 
2011 claims with G modifiers.16  We conducted these interviews in September 2011.   
 
Standards 
This inspection was conducted in accordance with the Quality Standards for Inspection 
and Evaluation approved by the Council of the Inspectors General on Integrity and 
Efficiency. 
 
 
 
 
 
 
                                                 
15 All analyses for GX are for the period from April 1, 2010the date the GX modifier became effective
to December 31, 2011. 
16 The carriers processed the remaining 22 percent of claims. 
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
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RESULTS 
 
In 2011, Medicare paid nearly $744 million for Part B claims that providers 
expected to be denied as not reasonable and necessary or as not being covered by 
Medicare 
Medicare paid for 16.5 million Part B claims with GA, GZ, GX, and GY modifiers.  Most 
of these claims (98 percent) were submitted with GA modifiers.  Another 2 percent of 
claims were submitted with GZ modifiers.  Less than 1 percent of claims were submitted 
with GY and GX modifiers.  See Table 4.    
 
Table 4:  Part B Claims With G Modifiers, 2011 
Number of Paid  Percentage of Paid Claims 
Modifier  Claims  With G Modifiers  Total Amount Paid  
GA   16,165,721  97.7%  $727,224,448  
GZ  352,735  2.1%  $14,240,381  
GY   9,081  0.1%  $1,043,755  
GX  16,914  0.1%  $1,360,584  
Total  16,544,451  100%  $743,869,168  
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
  Page 7  Marilyn Tavenner 
 
In contrast to their processing of GA modifiers, almost all contractors reported having 
edits specific to GZ modifiers.  Providers use GZ modifiers to indicate that they expect 
Medicare to deny a service or item as not reasonable and necessary and that they do not 
have an ABN on file.  As previously noted, beginning in July 2011, CMS required 
contractors to automatically deny claims with GZ modifiers.  While 12 contractors that 
we interviewed reported having edits to automatically deny claims with GZ modifiers, 
the remaining contractor did not.  This contractor noted that it had other edits that affect 
some claims with GZ modifiers, such as edits to check that services and items met 
Medicare coverage requirements, but that it did not automatically deny all claims with 
GZ modifiers, as required. 
 
In 2011, Medicare paid for 26 percent of claims submitted with GZ modifiers, totaling 
$14.2 million.  Almost all of these claims were for services or items provided before  
July 2011.18  As noted previously, CMS required contractors to automatically deny 
claims with GZ modifiers for service or items provided on or after July 1, 2011.  About  
three-quarters of the paid claims with GZ modifiers were for laboratory tests.   
Contractors also do not always consider modifiers that providers use to indicate that 
services or items are not covered by Medicare 
Providers use GY modifiers to indicate that either a service or item is statutorily excluded 
(e.g., eyeglasses) or that it does not meet the definition of any Medicare benefit (e.g., 
surgical dressings that are used to clean or protect intact skin rather than to cover an 
actual wound).  Medicare gives contractors the discretion to automatically deny claims 
with GY modifiers.  Eleven of the thirteen contractors we interviewed automatically 
denied these claims, while two contractors did not.  One of these contractors reported 
that, instead of automatic denial, it had an edit in place that flags these claims for review.  
The other contractor reported that it had other edits that affect some claims with 
GY modifiers, such as edits to check that services and items met Medicare coverage 
requirements. 
 
In 2011, Medicare paid for less than 1 percent of claims with GY modifiers, totaling  
$1 million.  As shown in Table 4, the majority of paid claims with GY modifiers 
(87 percent) were for DMEPOS.  Most of these claims were for accessories for 
prosthetics and orthotic devices.  The next most common claims with GY modifiers were 
for enteral and parenteral nutrition; ambulance services; and drugs, such as vitamin B12 
injections.   
   
                                                 
18 CMS paid for 0.10 percent of GZ claims for services or items provided on or after July 1, 2011, totaling 
$66,441 in payments.   
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
  Page 8  Marilyn Tavenner 
 
Table 5:  Top Categories of Paid Part B Services and Items With GY Modifiers, 2011 
Number of Paid  Percentage of Paid 
Claims with  Claims with  Total Amount 
Service or Item Category  GY Modifiers  GY Modifiers  Paid 
7,892   87%  $624,560 
Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies 
783  9%  $251,067  
Enteral and Parenteral Nutrition 
177  2%  $30,478  
Ambulance 
Drugs   130  1%  $108,729  
(e.g., certain injections, including 
vitamin B12 and Ranibizumab) 
Other Services and Items*  99  1%  $28,920 
 
      
Source:  OIG analysis of CMS claims data, 2012. 
      * This includes several service and item categories that each accounted for 0.1 percent or less of all paid claims with GY modifiers. 
 
Providers use GX modifiers to indicate that the service or item is statutorily not covered 
by Medicare and they voluntarily notified the beneficiary with an ABN that he or she is 
liable for the claim.  Medicare established the GX modifier in April 2010 for Part A 
claims.  Medicare has not given instructions to contractors on how to process Part B 
claims with the GX modifier.19   
 
In 2011, Medicare paid for 11 percent of claims submitted with GX modifiers, totaling 
$1.3 million.20  In 2011, almost a third of the paid claims with GX modifiers were for 
imaging services, while 21 percent were for laboratory tests.  Another 13 percent were for 
chiropractic services.   
 
Further, Medicare paid $4.1 million for Part B claims that included inappropriate 
combinations of G modifiers from 2002 to 2011 
With the exception of a GX modifier paired with a GY modifier, all other combinations 
of G modifiers on the same claim are inappropriate.  From 2002 to 2011, Medicare paid 
$4.1 million for claims submitted with inappropriate G modifier combinations.  Claims 
that contained both a GA and GY modifier made up the vast majority of these claims, 
totaling $3.9 million in payments.  Claims with this combination indicate that the 
provider expects that the service or item is not reasonable and necessary and that it is not 
covered by Medicare.   
 
Medicare paid $89,973 for claims with the combination of a GA and GZ modifier.  
Including both modifiers is contradictory and indicates that the provider expects that 
claim to be denied as not reasonable and necessary and either provided an ABN (GA) or 
did not provide an ABN (GZ).  Because contractors must automatically deny claims that 
include both GA and GZ modifiers, it is unclear why Medicare paid for these claims.   
   
                                                 
19 CMS instructs contractors to automatically deny Part A claims with GX modifiers.  See Requirement 
Number 6563.5 in CMS, CR 6563, Transmittal 1921, Billing for Services Related to Voluntary Uses of 
Advanced Beneficiary Notices of Noncoverage (ABNs), February 19, 2010. 
20 This only includes Part B claims submitted with GX modifiers for service dates on or after April 1, 2010, 
the date CMS first allowed providers to use the GX modifier under its current definition. 
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
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CONCLUSION 
 
This memorandum report describes Medicare payments for Part B claims with 
G modifiers and how contractors use these modifiers in their claims processing.   
 
In 2011, Medicare paid nearly $744 million for Part B claims with G modifiers.  We 
found that vulnerabilities exist in how Medicare pays for these claims.  When processing 
claims, contractors often do not consider the modifiers that providers use to indicate that 
they expect the services or items to be denied as not reasonable and necessary.  
Contractors also do not always consider the modifiers that providers use to indicate that 
services or items are not covered by Medicare.  Although contractors have checks that 
affect some of these claims, such as determining whether the services and items met 
Medicare frequency limitations, they do not specifically check for claims providers 
expect not to be paid.  Further, we found that Medicare paid $4.1 million for claims that 
included inappropriate combinations of G modifiers from 2002 to 2011.  
 
CMS needs to address the vulnerabilities presented in this report.  We are aware that 
CMS developed a GU modifier for providers to use on claims for items and services for 
which the routine use of ABNs is appropriate, such as for services that are subject to 
frequency limitations.  This is one way to address the problem in that it would allow 
providers to use the GA modifier solely for other items and services that they expect to be 
denied.  CMS would then need to instruct contractors to automatically deny or review 
claims with GA modifiers before paying them.  To date, however, CMS has not issued 
any instructions about the GU modifier or how contractors should process these claims.  
CMS needs to either issue such instructions or develop other methods of addressing these 
program vulnerabilities.   
 
In addition, CMS needs to ensure that all contractors are following its instructions to 
automatically deny claims with GZ modifiers.  CMS also needs to instruct contractors to 
automatically deny claims with GY modifiers and ensure that contractors follow these 
instructions.  Further, CMS should decide whether to implement the GX modifier for 
Part B claims, since providers are already using it.  Lastly, CMS should ensure that 
contractors do not pay for claims with inappropriate combinations of G modifiers.  OIG 
will continue to monitor claims with G modifiers and will undertake a review in the 
future if it appears that CMS has not addressed the problems presented in this report. 
 
This report is being issued directly in final form because it contains no recommendations.  
If you have comments or questions about this report, please provide them within 60 days.  
Please refer to report number OEI-02-10-00160 in all correspondence. 
Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
   
 
APPENDIX A  
 
Categories of Paid Part B Services and Items with GA Modifiers, 2011  
 
Number of Paid Claims  Percentage of Paid  Total Amount 
Service or Item Category  with GA Modifiers  Claims with GA Modifiers  Paid 
Laboratory tests  8,321,058  51.5%  $125,730,915  
Chiropractic  2,420,242  15.0%  $78,382,437  
Standard imaging  1,157,186  7.2%  $97,088,523  
Minor procedures  1,065,797  6.6%  $54,151,802  
Office visits  728,031  4.5%  $38,226,312  
Other drugs  448,512  2.8%  $85,072,111  
Other tests  398,379  2.5%  $18,110,098  
Other durable medical equipment 
(DME)  210,823  1.3%  $20,278,913  
Echography/ultrasonography  198,300  1.2%  $29,801,792  
Immunizations/vaccinations  184,297  1.1%  $4,187,908  
Prosthetic/orthotic devices  173,895  1.1%  $29,453,648  
Ambulatory procedures  143,505  0.9%  $10,166,348  
Advanced imaging  142,215  0.9%  $54,802,485  
Specialist  122,787  0.8%  $11,393,247  
Eye procedure  105,538  0.7%  $16,944,745  
Wheelchairs  78,337  0.5%  $8,083,403  
Endoscopy  58,991  0.4%  $16,502,566  
Oxygen and supplies  41,824  0.3%  $4,801,681  
Imaging/procedure  33,978  0.2%  $1,872,673  
Hospital beds  23,859  0.2%  $ 2,473,447  
Oncology  13,555  0.1%  $1,170,745  
Anesthesia  12,346  0.1%  $1,740,967  
Other  12,403  0.1%  $827,033  
Ambulance  11,921  0.1%  $2,499,763  
Medical/surgical supplies  11,633  0.1%  $694,633  
Chemotherapy  10,374  0.1%  $2,775,061  
Enteral and parenteral  9,729  0.1%  $3,710,177  
Hospital visit  6,575  0.0%  $751,710  
Undefined codes  5,186  0.0%  $535,047  
Major procedure  6,393  0.0%  $4,233,264  
Drugs administered through DME  3,875  0.0%  $ 316,977  
Dialysis services  1,381  0.0%  $181,084  
Nursing home visit  1,480  0.0%  $140,068  
Home visit  1,268  0.0%  $116,189  
Emergency room visit  47  0.0%  $6,505  
Hearing and speech services  1  0.0%  $171 
     Total  16,165,721  100%*  $727,224,448 
Source:  Office of Inspector General analysis of Centers for Medicare & Medicaid Services claims data, 2012. 
*The rows do not sum to the total due to rounding. 
 
OEI-02-10-00160      Medicare Payments for Part B Claims with G Modifiers    10