Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

MARCH 2000 

OEI-04-97-00391 

Medicare Allowed Charges for 

Orthotic Body Jackets 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), mandated by Public Law 95-452, and 

amended by Public Law 100-504, is to protect the integrity of the Department of Health and 

Human Services programs as well as the health and welfare of beneficiaries served by them. This 

statutory mission is carried out through a nationwide program of audits, investigations, 

inspections, sanctions, and fraud alerts. The Inspector General informs the Secretary of program 

and management problems and recommends legislative, regulatory, and operational approaches to 

correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 

Regional Inspector General, and Christopher H. Koehler, Deputy Regional Inspector General. 

Principal OEI staff included: 

REGION HEADQUARTERS 

Greg Jones, Project Leader Stuart Wright, Program Specialist 

Betty Apt, Team Leader Winnie Walker, Program Specialist 

Peggy Daniel, Program Analyst Barbara Tedesco, Statistician 

To obtain copies of this report, please call the Atlanta Regional Office at 404-562-7723. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
TABLE OF CONTENTS 

PAGE

EXECUTIVE SUMMARY .............................................. 1

INTRODUCTION ..................................................... 3

FINDINGS

Medicare Pays More Than Medicaid ....................................... 6

Medicare Often Pays More Than Tricare .................................... 7

Medicare Reimbursement Rates Exceeded Suppliers Cost ....................... 9

RECOMMENDATIONS ............................................... 11

AGENCY COMMENTS ................................................ 12

APPENDICES

A: Potential Savings ................................................... 13

B: Agency Comments ................................................. 15
EXECUTIVE SUMMARY 

PURPOSE 

To analyze the reasonableness of Medicare allowed charges for orthotic body jackets coded 

L0430. 

BACKGROUND 

Medicare covers spinal orthoses only when ordered by a physician. Payments for orthotics 

are based on a fee schedule. Payments are either the fee schedule rate or the actual charge 

billed by the supplier, whichever is lower. 

In 1999, the OIG reported that although all orthotic devices claimed as code L0430 in 

1996 were eligible for some level of Medicare reimbursement, suppliers had upcoded 42 

percent of the claims. This study is a follow-on to the 1999 report. 

FINDINGS 

Medicare Pays More for L0430 Orthotic Body Jackets than Medicaid 

On average, in the eight States we reviewed, Medicare rates exceeded the Medicaid rate by 

21 percent. 

Medicare Often Pays More for L0430 Orthotic Body Jackets than Tricare 

For half of the eight States we reviewed, the Medicare reimbursement rate exceeded 

Tricare (formerly CHAMPUS) rates by an average of 7.4 percent. 

Medicare Reimbursement Rates Greatly Exceeded the Prices Suppliers Paid for 

Orthotic Body Jackets 

The Medicare allowed charge, compared to suppliers’ costs for code L0430 devices, 

resulted in a mark-up in cost ranging from 54 percent to 829 percent. Therefore, 

Medicare’s allowed charges for orthotic body jackets sold under Medicare code L0430 

may be allowing excessive profits for some suppliers. 

We defined mark-up as the difference between the supplier invoice cost and the Medicare 

allowed charge. 

Medicare Payments for Orthotic Body Jackets 1 OEI-04-97-00391 
RECOMMENDATION 

The Balanced Budget Act of 1997 gave HCFA greater flexibility in determining 

appropriate reimbursement rates when rates are found to be grossly excessive, deficient, or 

not inherently reasonable. That inherent reasonableness authority was limited by a 

provision of the Balanced Budget Refinement Act of 1999. However, we continue to 

support the need for more reasonable Medicare prices for orthotic body jackets. 

Medicare allowed charge resulted in mark-ups which ranged from 54 percent to 832 

percent. Such Medicare rates could allow excessively high profits in some instances. Both 

State Medicaid agencies and Tricare have shown that suppliers will make L0430 orthotic 

body jackets available to government beneficiaries at lower prices than what Medicare 

pays. 

Therefore, we recommend that HCFA: 

determine the appropriateness of Medicare allowed charges for orthotic 

body jackets and adjust Medicare reimbursement accordingly. 

Depending on what HCFA determines to be a reasonable mark-up, Medicare and its 

beneficiaries could have saved $14,212 if the mark-up had been limited to 500 percent for 

the 45 orthotic devices in our sample. If the mark-up had been limited to 100 percent, the 

savings would have been $48,174. Projected to the Medicare universe the potential 

savings would be between $227,380 and $770,780. 

AGENCY COMMENTS 

The Administrator, Health Care Financing Administration commented on our draft report. 

She noted that the Balanced Budget Refinement Act of 1999 precludes HCFA from using 

its inherent reasonableness authority to change Medicare allowed charges for orthotic body 

jackets. Appendix B contains the full text of HCFAs comments. 

We modified our recommendation to reflect the limitations in HCFAs authority. We are 

pleased that HCFA agreed to review the appropriateness of allowed charges for orthotic 

body jackets once they issue their new final rule on its inherent reasonableness authority. 

Medicare Payments for Orthotic Body Jackets 2 OEI-04-97-00391 
INTRODUCTION 

PURPOSE 

To analyze the reasonableness of Medicare allowed charges for orthotic body jackets coded 

L0430. 

BACKGROUND 

Medicare Coverage of Orthotic Body Jackets 

Medicare covers spinal orthoses only when specific conditions are met. They must be 

ordered by a physician to reduce pain by restricting mobility of the trunk, to facilitate 

healing following an injury or surgical procedure on the spine, or to support weak spinal 

muscles or a deformed spine. 

Medicare payments for durable medical equipment, orthotics, and prosthetics are based on 

a fee schedule. Payments are either the fee schedule rate or the actual charge billed by the 

supplier, whichever is lower. The fee schedule methodology uses historical data to 

determine an appropriate reimbursement rate. Fee schedules are updated year to year, 

based on the consumer price index or as directed by legislation. 

Previous Office of Inspector General Studies on Orthoses 

In 1994, the Office of Inspector General (OIG) reported that 95 percent of claims 

submitted in 1991 for orthotic body jackets coded L0430 were non-legitimate and should 

not have been paid.1 The devices supplied were usually nothing more than a seat cushion 

for a wheel chair patient. A companion report2 described suppliers’ marketing practices for 

orthotic body jackets. 

In 1997, the OIG reported that at least 19 percent of orthotics claimed for Medicare 

reimbursement were medically unnecessary.3 

1 Medicare Payments for Orthotic Body Jackets (OEI-04-92-01080)

2 Marketing of Orthotic Body Jackets (OEI-04-92-01081)

3 Medicare Payments for Orthotics (OEI-02-95-00380)

Medicare Payments for Orthotic Body Jackets 3 OEI-04-97-00391 
In 1999, the OIG reported that although all orthotic devices claimed as code L0430 in 

1996 were eligible for some level of Medicare reimbursement, suppliers had upcoded 42 

percent of the claims.4 

As part of our 1999 study we obtained supplier invoices. The invoices disclosed the 

amount that suppliers’ paid for orthotic body jackets. The suppliers’ costs raised questions 

as to the appropriateness of Medicare allowed charges. To obtain some insight into the 

reasonableness of Medicare allowed charges we examined suppliers’ mark-up. We did so 

by comparing suppliers costs to the Medicare allowed charge. We also looked at 

reimbursement rates of other government payers. 

METHODOLOGY 

We compared Medicare 1998 L0430 reimbursement rates to 1998 rates for Medicaid and 

Tricare (formerly CHAMPUS). For our comparison, we chose five States that account for 

approximately 40 percent of Medicare expenditures and beneficiaries: California, Texas, 

New York, Florida, and Illinois. To add variation to our analysis, we also included three 

smaller States: Georgia, Connecticut, and Massachusetts. We selected Medicaid and 

Tricare for comparison because, like Medicare, they are public payers. We obtained 

reimbursement rates and rate setting methodology from pricing representatives of State 

Medicaid and Tricare organizations. We then compared those rates to Medicare allowed 

charges. 

To get additional insight into the reasonableness of Medicare reimbursement for code 

L0430 orthotic body jackets we determined suppliers’ mark-up by comparing invoice costs 

to the Medicare allowed charge. 

To do this we reviewed a 5 percent sample of claims for code L0430 contained in HCFA’s 

1996 National Claims History File. This sample consisted of 302 L0430 claims which had 

been filed in 1996. We dropped 3 of the 302 claims because we could not locate the 

address for the supplier. This left us with a sample of 299 paid claims which represented 

126 suppliers and 289 beneficiaries. Ten beneficiaries in our sample received two body 

jackets each. We surveyed the 126 suppliers by mail questionnaire. 

Of 85 suppliers who responded to our survey, 44 (51.8 percent) provided requested 

invoices showing how much suppliers paid manufacturers for the devices they supplied to 

Medicare beneficiaries. The invoices enabled us to determine the amount that Medicare 

allowed charges exceeded suppliers’ costs for orthotic devices (i.e., percent mark-up). The 

invoices represented 122 claims or devices. 

Because our 1999 inspection, Medicare Payments for Orthotic Body Jackets (OEI-04-97-

00390, showed that 42 of the 122 devices had been up-coded by suppliers, we removed 

4 Medicare Payments for Orthotic Body Jackets (OEI-04-97-00390)

Medicare Payments for Orthotic Body Jackets 4 OEI-04-97-00391
them from our review. Therefore, our final analysis consisted of 80 orthotic body jacket 

claims from 24 suppliers. 

Finally, we interviewed HCFA officials who are responsible for the reimbursement and 

payment for orthotics and prosthetics, pricing representatives from the Region C Durable 

Medical Equipment Regional Carrier (DMERC), the coding staff from the Statistical 

Analysis Durable Medical Equipment Regional Carrier (SADMERC), officials from the 

American Orthotic and Prosthetic Association (AOPA)--the trade organization which 

represents the industry, and numerous licensed orthotists. 

_ _ _ _ _ _ _ _ _ _ _ _ _ 

We did our inspection between September 1997 and June 1999. We conducted the 

inspection in accordance with the Quality Standards for Inspections issued by the 

President's Council on Integrity and Efficiency. 

Medicare Payments for Orthotic Body Jackets 5 OEI-04-97-00391 
FINDINGS 

Medicare pays more for L0430 orthotic body jackets than 

Medicaid 

Medicare payments exceeded Medicaid payments by 21 percent 

Medicaid is a jointly funded cooperative venture between the Federal and State 

governments to assist States in the provision of adequate medical care to eligible needy 

persons. All of the States in our analysis reimbursed for an L0430 orthotic body jacket. 

On average, in the eight States we reviewed, the Medicare rates exceeded the Medicaid 

rate by 21 percent. The Medicaid rates ranged from a high of $1,073 in Texas to a low of 

$399 in Florida which respectively is 5.7 percent and 61.7 percent lower than the Medicare 

rates in those same States. 

Table 1 

Comparison of Medicare and Medicaid Reimbursement Rates 

for Orthotic Body Jackets

Medicare 

Allowed Charge 

Medicaid 

Allowed Charge 

% Difference 

from Medicare 

TX $1,138 $1, 073 - 5.71 

IL $1,136 $976 - 14.1 

CA $1,122 $690 - 38.5 

GA $1, 042 $938 - 10.0 

FL $1, 042 $399 - 61.7 

NY $1,036 $900 - 13.1 

MA $981 $864 - 11.9 

CT $981 $883 - 10.0 

State Medicaid rates are partially based on Medicare rates 

Each State has a distinct history and methodology for the way in which reimbursement for 

orthotics and prosthetics is determined. Most States noted that orthotic body jackets are 

not products they deal with a lot. In fact, California Medicaid paid for only 11 in 1998. 

However, most of the Medicaid pricing representatives noted that the Medicare rate played 

some role in the determination of their L0430 reimbursement rate. 

Medicare Payments for Orthotic Body Jackets 6 OEI-04-97-00391 
For example, Georgia and Connecticut use the Medicare allowed charges for all durable 

medical equipment and reduce that amount by 10 percent. 

Massachusetts, Illinois, and Texas also use the Medicare rate in their reimbursement 

methodology. Massachusetts Medicaid staff said their goal is to not be any higher than the 

Medicare rate, and in most cases they are a little lower. They also noted that a 11.9 

percent rate below Medicare’s was probably a little lower than usual. They expressed their 

plans to increase their rate by 1.4 percent in the near future. 

Illinois reimbursement rate is 14.1 percent less than Medicare. However, they said they 

plan to bring it up to the Medicare level of $1,136. On a slightly different note from other 

States, the Illinois representative said their goal is to keep the rates at the Medicare level. 

They believe this was needed so they will not lose providers and therefore be unable to 

meet the needs of Medicaid beneficiaries. 

Texas had the highest Medicaid allowed charge which was 5.7 percent less than their 

respective Medicare rate. In addition to the Medicare rate, Texas uses historical trend data 

and the reimbursement rate for another health program in the State to determine their 

reimbursement rate. 

Florida and California have the lowest reimbursement among the eight States we reviewed. 

To date both Florida and California have not received any formal complaints from suppliers 

about their rates. 

Florida’s unusually low rate of $399 can in some part be explained by the fact that they 

established their rates in 1990 based on 80 percent of the Medicare allowed charge. Then in 

1995, the Florida legislature mandated a 3 percent across the board rate reduction for all 

durable medical equipment including orthotics and prosthetics. 

A California Medicaid representative noted that their low L0430 reimbursement rate was 

an anomaly. They explained California’s other durable medical equipment Medicaid 

reimbursement rates are usually in the upper sixty percentile of the Medicare rates. 

New York was the only State where the Medicare rate did not have an influence on their 

reimbursement rate. Pricing representatives noted the $900 rate was set in 1982 and was 

very inflated for that time period. 

Medicare often pays more for L0430 orthotic body jackets 

than Tricare 

Tricare (formerly CHAMPUS) is the health care program for active duty and retired 

members of the uniformed services, their families, and survivors. In four of the eight States 

we reviewed, the Medicare reimbursement rate for L0430 orthotic body jackets exceeded 

the Tricare rates by an average of 7.4 percent. Only one State we reviewed, New York, 

paid more than Medicare. Connecticut, Illinois, and Massachusetts did not have any claims 

Medicare Payments for Orthotic Body Jackets 7 OEI-04-97-00391 
t t

t t

t t

t

billed in 1998. However, their general practice is to reimburse code L0430 invoices as 

billed by suppliers. 

Table 2

Comparison of Medicare and Tricare Reimbursement 

Rates for Orthotic Body Jackets 

Medicare 

Allowed Charge 

Tricare 

Allowed Charge 

% Difference 

from Medicare 

TX $1,138 $1,036 -8.9 

IL $1,136 t t

CA $1,122 $1,036 -7.7 

GA $1, 042 $975 -6.4 

FL $1, 042 $975 -6.4 

NY $1,036 $1,347 +30.0 

MA $981 t t

CT $981 t t

t = no claims billed in 1998 

The Tricare Policy Manual states that the maximum allowable amount for a customized 

item of durable medical equipment (which includes orthotics and prosthetics) may be 

determined by a Tricare contractor using documented evidence of retail prices for 

customization in the State of purchase. If a contractor cannot derive precise data on the 

frequency of services from its records, it may use any information it has about the volume 

of business done by various suppliers in its area in order to develop the maximum allowable 

charge. 

Medicare Payments for Orthotic Body Jackets 8 OEI-04-97-00391 
Medicare reimbursement rates greatly exceeded the prices 

suppliers paid for orthotic body jackets 

We compared 24 suppliers’ costs to the Medicare allowed charge for 80 orthotic body 

jacket devices. Our comparison showed that the Medicare allowed charge resulted in a 

mark-up in cost ranging from 54 percent to 832 percent (See Table 3). 

Table 3 shows the wide variation in mark-up. We observed that 3 of the 24 suppliers 

received a mark-up between 200 and 300 percent. This represented 33 percent of the 80 

claims. Of the 24 total suppliers, 8 received a mark-up in excess of 700 percent. The 40 

claims submitted by these 8 suppliers represented 50 percent of the 80 claims in our 

sample. 

Table 3

Mark-up for Code L0430 in 1996

% 

Mark-Up 

# of 

Suppliers 

# of 

Claims 

% of 

Claims 

54-100 1 1 1 

101-200 7 8 10 

201-300 3 26 32.5 

301-400 1 1 1.3 

401-500 4 4 5 

501-600 0 0 0 

601-700 0 0 0 

701-800 4 17 21.3 

800-832 4 23 28.8 

Total 24 80 100 

The mark-up is the difference between the supplier invoice cost and the Medicare allowed 

charge. It includes supplier expenses such as overhead and professional services to fit 

orthotic devices. It also includes supplier profit. 

We did not determine what is or is not an appropriate mark-up for orthotic body jackets. 

Further, HCFA headquarters officials told us they do not know what would be a reasonable 

and appropriate mark-up. HCFA did observe that an extremely wide variation in what 

suppliers pay to manufacturers for L0430 orthotic body jackets could indicate differences 

in quality of the devices. They were not sure that this was the case with our sample, and 

we did not examine differences in quality. According to a review by the SADMERC, 

however, all of the devices in our sample met Medicare’s standards to qualify as an L0430 

orthotic body jacket. 

Medicare Payments for Orthotic Body Jackets 9 OEI-04-97-00391 
Some of the generous mark-ups may be explained by supplier effectiveness at obtaining 

discounts from manufacturers for devices sold to Medicare beneficiaries. Another possible 

explanation could be geographic variations. However, it seems unlikely that such 

variations would explain mark-up differences ranging from 54 to 832 percent. Therefore, 

Medicare’s allowed charges for orthotic body jackets sold under code L0430 may be 

allowing excessive, unreasonable profits for some suppliers. 

Table 4 shows potential Medicare costs for the 80 devices in our sample based on various 

levels of mark-up. The table also shows the difference between those potential Medicare 

costs and the actual Medicare costs for the 80 devices. 

Table 4

Potential Savings to Medicare Based on Various Mark-up Levels

# of 

Orthotic 

Body 

Jackets 

Actual 

Supplier 

Cost5 

If Mark-Up 

Levels (%) 

are 

Mark-Up 

Multiplie 

r 

Actual 

Medicare 

Cost6 

Potential 

Medicare 

Cost7 

Potential 

Savings/ 

Additional 

Cost to 

Medicare8 

80 $18,869 100 (2) $85,592 $37,738 $47,854 

80 $18,869 200 (3) $85,592 $56,607 $28,985 

80 $18,869 300 (4) $85,592 $75,476 $10,116 

80 $18,869 400 (5) $85,592 $94,345 ($8,753) 

80 $18,869 500 (6) $85,592 $113,214 ($27,622) 

80 $18,869 600 (7) $85,592 $132,083 ($46,491) 

80 $18,869 700 (8) $85,592 $150,952 ($65,360) 

80 $18,869 800 (9) $85,592 $169,821 ($84,229) 

5 $18,869 is the actual cost that all suppliers in our sample paid for the 80 orthotic claims. 

6 $85,592 is the actual total amount that Medicare reimbursed for all 80 orthotic claims in our sample. 

7 Potential Medicare Cost = (Actual Supplier Cost * Mark-Up Multiplier)

8 Potential Savings = (Actual Medicare Cost - Potential Medicare Cost)

Medicare Payments for Orthotic Body Jackets 10 OEI-04-97-00391 
RECOMMENDATIONS 

The Balanced Budget Act of 1997 gave HCFA greater flexibility in determining 

appropriate reimbursement rates when rates are found to be grossly excessive, deficient, or 

not inherently reasonable. That inherent reasonableness authority was limited by a 

provision of the Balanced Budget Refinement Act of 1999. However, we continue to 

support the need for more reasonable Medicare prices for orthotic body jackets. 

Medicare allowed charge resulted in mark-ups which ranged from 54 percent to 832 

percent. Such Medicare rates could allow excessively high profits in some instances. Both 

State Medicaid agencies and Tricare have shown that suppliers will make L0430 orthotic 

body jackets available to government beneficiaries at lower prices than what Medicare 

pays. 

Therefore, we recommend that HCFA: 

determine the appropriateness of Medicare allowed charges for orthotic 

body jackets and adjust Medicare reimbursement accordingly. 

The potential savings to Medicare and its beneficiaries will vary depending on what HCFA 

determines to be a reasonable mark-up. For example, the Table below shows the potential 

savings based on various levels of mark-up for the 45 orthotic claims we reviewed. 

Appendix A shows our calculations. 

Mark-up limit # of claims Potential Savings 

for Sample 

Projected Savings to 

theMedicare 

Universe 

100% 45 $48,174 $770,780 

300% 45 $25,201 $403,220 

500% 45 $14,212 $227,380 

Medicare Payments for Orthotic Body Jackets 11 OEI-04-97-00391 
AGENCY COMMENTS 

The Administrator, Health Care Financing Administration commented on our draft report. 

She noted that the Balanced Budget Refinement Act of 1999 precludes HCFA from using 

its inherent reasonableness authority to change Medicare allowed charges for orthotic body 

jackets. Appendix B contains the full text of HCFAs comments. 

We modified our recommendation to reflect the limitations in HCFAs authority. We are 

pleased that HCFA agreed to review the appropriateness of allowed charges for orthotic 

body jackets once they issue their new final rule on its inherent reasonableness authority. 

Medicare Payments for Orthotic Body Jackets 12 OEI-04-97-00391 
1 2 3 4 5 6 7 8 9 10 11

Weighted Invoice Weighted 100% 300% 500%

# of Medicare Avg Medicare Avg Cost of Invoice Cost *Potential Potential Potential 

Supplier # Claims Allwd Chg Allwd Chg Device of device $ Mark-up % Mark-Up Savings Savings Savings

54 1 $1,081 $1,081 $700 $700 $381 54.4

1 1 $1,004 $1,004 $490 $490 $514 104.9 $24

27 2 $1,004 $2,008 $480 $960 $524 109.2 $88

3 1 $998 $998 $460 $460 $538 117.0 $78

34 1 $1,096 $1,096 $425 $425 $671 157.9 $246

45 1 $900 $900 $329 $329 $571 173.6 $242

43 1 $945 $945 $345 $345 $600 173.9 $255

20 1 $998 $998 $350 $350 $648 185.1 $298

26 24 $1,081 $25,944 $350 $8,400 $731 208.9 $9,144

59 1 $1,094 $1,094 $325 $325 $769 236.6 $444

4 1 $1,004 $1,004 $255 $255 $749 293.7 $494

21.1 1 $1,096 $1,096 $238 $238 $858 360.5 $620 $144

21 1 $1,096 $1,096 $218 $218 $878 402.8 $660 $224

5 1 $990 $990 $176 $176 $814 461.4 $637 $285

6 1 $1,004 $1,004 $176 $176 $828 469.4 $651 $299

33 1 $1,094 $1,094 $183 $183 $911 497.8 $728 $362

31 2 $1,081 $2,162 $129 $259 $952 736.4 $1,645 $1,128 $611

24 1 $1,081 $1,081 $129 $129 $952 736.4 $823 $564 $306

32 4 $1,081 $4,324 $129 $517 $952 736.4 $3,290 $2,256 $1,222

8 10 $1,081 $10,810 $126 $1,260 $955 757.9 $8,290 $5,770 $3,250

53 1 $1,081 $1,081 $116 $116 $965 829.3 $848 $616 $383

36 14 $1,081 $15,134 $116 $1,629 $965 829.3 $11,877 $8,620 $5,362

30 1 $1,081 $1,081 $116 $116 $965 829.3 $848 $616 $383

51 7 $1,081 $7,567 $116 $812 $965 831.9 $5,943 $4,319 $2,695

80 $1,047 $85,592 $270 $18,869 376.3 $48,174 $25,201 $14,212

Weighted #'s: $1,070 $236

Average Allowed Mark-Up: 354%

Total Savings based on 100% cap= $48,174

Total Savings based on 300% cap= $25,201

Total Savings based on 500% cap= $14,212

*Potential Savings= (column 4-(column 6 * 100% Mark-up)

Note: We did not do an analysis to determine the quality between the orthotic body jackets that had an invoice cost of $116 vs $700. 

Medicare Payments for Orthotic Body Jackets 13 OEI-04-97-00391

APPENDIX A

Potential Savings by Limiting Mark-up for Code

L0430 to 300 percent
APPENDIX A 

con’t 

Potential Medicare Savings for Code L0430

Orthotic Body Jacket with Mark-ups over 100, 300, and 500

percent

1. 100%: $48,174 (Total Potential Overpayment for Sample) 

300%: $25,201 (Total Potential Overpayment for Sample) 

500%: $14,212 (Total Potential Overpayment for Sample) 

2. Multiply the overpayment by .80, since Medicare pays 80% of the allowed charge. 

100%: $48,174 x .80 = $38,359 (Loss to the Medicare program) 

300%: $25,201 x .80 = $20,161 (Loss to the Medicare program) 

500%: $14,212 x .80 = $11,370 (Loss to the Medicare program) 

3. Multiply the loss to the Medicare program by 20, since these figures are on a 5 

percent sample. 

100%: $38,359 x 20 = $770,780 

300%: $20,161 x 20 = $403,220 

500%: $11,369 x 20 = $227,380 

4. Projected savings over 5 years. 

100%: $770,780 x 5 = $3,853,900 

300%: $403,220 x 5 = $2,016,100 

500%: $227,380 x 5 = $1,136,900 

Note: Our projection is conservative as it is based on 80 of the 302 claims from a 5 percent 

sample of the National Claims History file. If we analyzed a larger portion of the 302 

claims our overpayment estimates of $14,212 - $48,174 would probably be much higher. 

Confidence Intervals 

Mark-up Sample 

Size 

Potential 

Overpayment 

+/- Lower 95% 

Confidence Interval 

Upper 95% 

Confidence Interval 

100% 80 $770,780 $74,328 $696,452 $845,108 

300% 80 $403,220 $81,806 $321,410 $485,022 

500% 80 $227,380 $50,595 $176,785 $277,975 

Medicare Payments for Orthotic Body Jackets 14 OEI-04-97-00391 
APPENDIX B 

Medicare Payments for Orthotic Body Jackets 15 OEI-04-97-00391 
APPENDIX B 

con’t 

Medicare Payments for Orthotic Body Jackets 16 OEI-04-97-00391