**GAO-03-359R**                      Dec 23, 2002                  

-   
-   
-   
-   

    Jump To:  
-  Elder Abuse 
-  Services for Older Adults 
-  State and Local-Level Drivers and Trends 
-  State and Local Fiscal Projections 
-  Federal Borrowing 
-  Managing the Debt 
-  Summary of Funding Provisions 
-  Auditing the Government's Books 
-  Unpacking the Financial Report 
-  Highlights 
-  Recommendations 
-  Background 
-  About This Work 
-  About This Work 
-  Trends 
-  About the Center 
-  Why It's High Risk 
-  What Remains To Be Done 
-  Key Reports 
-  Newest COVID-Related Reports 
-  AI Use Cases 
-  Flood Insurance 
-  Past Pandemic-Related Reports 
-  CARES Act Oversight Reports 
-  All COVID-19 Reports 
-  Report Suspected Fraud 
-  Subjects 
-  How to Get Notified 
-  Past Reports 
-  Public Health Threats 
-  Explore the FY 2022 and 2023 Funds 
-  Status of FY22 Projects 
-  Lessons Learned 
-  Agency Reports 
-  Recent Reports 
-  Recommendations 
-  Supplemental Material 
-  Full Report 
-  Additional Data 
-  View Decision 
-  Downloads 
-  Previously Identified Actions 
-  Related Pages 
-  Associated Agencies 
-  Tough Choices and Opportunities Ahead 
-  Americas Fiscal Future Key Areas 
-  Retirement Security Key Areas 
-  Current List 
-  About The High Risk List 
-  Area Ratings 
-  Previous High Risk Products 
-  Search Federal Vacancies 
-  Past Federal Vacancies 
-  Violation Letters 
-  About the Yellow Book 
-  Advisory Council 
-  Related Resources 
-  Comment Letters 
-  Related Publications 
-  Contacts and Resources 
-  Major Issues Facing the Nation 
-  Meeting Strategic Challenges 
-  Additional Resources 
-  Resources 
-  GAO Contacts 
-  Mission Teams 
-  Operations and Staff Offices  
-  Organization Chart  
-  Why a Career at GAO? 
-  Am I Qualified? 
-  Company Culture 
-  Reasonable Accommodations 
-  Video Gallery 
-  Paid Internships 
-  Student Volunteers 
-  Professional Development Program 
-  Advancement 
-  Executive Candidate Program 
-  Summer Associates 
-  Externships 
-  Benefits 
-  Contacts 

Skip to Highlights

## Highlights

GAO reviewed the Center for Medicare and Medicaid Services' (CMS) new rule on payment of services. GAO found that (1) the rule would set forth the process for establishing a realistic and equitable payment amount for all Medicare Part B Services when the existing payment amounts are inherently unreasonable because they are either grossly excessive or deficient; and (2) CMS complied with applicable requirements in promulgating the rule.

##  Department of Health and Human Services, Center for Medicare and Medicaid Services: Medicare Program; Application of Inherent Reasonableness to All Medicare Part B Services (OtherThan Physician Services), GAO-03-359R, December 23, 2002

B-291770December 23, 2002The Honorable Max Baucus     Chairman     The Honorable Chuck Grassley     Ranking Minority Member     Committee on Finance     United States SenateThe Honorable W.J. Billy Tauzin     Chairman     The Honorable John D. Dingell     Ranking Minority Member     Committee on Energy and Commerce     House of Representatives     The Honorable Bill Thomas     Chairman     The Honorable Charles B. Rangel     Ranking Minority Member     Committee on Ways and Means     House of Representatives     Subject:*Department of Health and Human Services, Center for Medicare and Medicaid Services: Medicare Program; Application of Inherent    Reasonableness to All Medicare Part B Services (Other Than Physician Services)*Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of Health and    Human Services, Center for Medicare and Medicaid Services (CMS), entitled Medicare Program; Application of Inherent Reasonableness to All Medicare Part B Services (Other Than Physician    Services) (RIN: 0938-AJ97).  We received the rule on December 12, 2002.  It was published in the Federal Register as an interim final rule on December 13, 2002.     67 Fed. Reg. 76684.     The interim final rule sets forth the process for establishing a realistic and equitable payment amount for all Medicare Part B services (other than physician services) when the existing payment    amounts are inherently unreasonable because they are either grossly excessive or deficient.     Enclosed is our assessment of the CMS's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.  Our review indicates that    the CMS complied with the applicable requirements.     If you have any questions about this report, please contact James W. Vickers, Assistant General Counsel, at (202) 512-8210.  The official responsible for GAO evaluation work relating to the    subject matter of the rule is William Scanlon, Managing Director, Health Care.  Mr. Scanlon can be reached at (202) 512-7114.                 signed     Kathleen E. Wannisky     Managing Associate General Counsel     Enclosurecc: Ann Stallion     Regulations Coordinator     Department of Health and       Human Services            ENCLOSURE     ANALYSIS UNDER 5 U.S.C.  801(a)(1)(B)(i)-(iv) OF A MAJOR RULE     ISSUED BY THE     DEPARTMENT OF HEALTH AND HUMAN SERVICES,     CENTER FOR MEDICARE AND MEDICAID SERVICES     ENTITLED     "MEDICARE PROGRAM; APPLICATION OF     INHERENT REASONABLENESS TO ALL MEDICARE PART B SERVICES     (OTHER THAN PHYSICIAN SERVICES)"     (RIN: 0938-AJ97)(i) Cost-benefit analysis     CMS states that the interim final rule does not include any actual inherent reasonableness determinations and, therefore, has no immediate impact on Medicare payment amounts.  The rule does    establish a process for making such determinations.  However, CMS does not have sufficient data to conduct a quantative analysis of the interim final rule.  CMS believes that the future    use of inherent reasonableness has the potential to have significant impact.     This possible impact has been shown by a CMS Office of the Inspector General report issued in June 2002, which indicated that Medicare might be overpaying between $130 million and $958 million    per year for 16 items of medical equipment.  Also, a General Accounting Office report entitled *Medical PaymentsUse of Revised 'Inherent Reasonableness' Generally    Appropriate* (GAO/HEHS-00-79) found that Medicare might be overpaying for medical equipment by more than 20 percent.     When CMS has sufficient data, it will prepare the required impact statements under Executive Order 12866 and publish it in the Federal Register.(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C.  603-605, 607, and 609     Based on the above reasoning, CMS states it does not have sufficient data to determine the impact of the interim final rule on small entities.  As noted above, when CMS has sufficient data    it will make the required determinations under the Regulatory Flexibility Act and publish the analysis in the Federal Register.(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.  1532-1535     As defined in title II, the interim final rule does not contain either an intergovernmental or private sector mandate of more than $100 million in any one year.(iv) Other relevant information or requirements under acts and executive orders     Administrative Procedure Act, 5 U.S.C.  551 etseq.     In section 223 of the Balanced Budget Refinement Act of 1999, CMS is prohibited from using the inherent reasonableness authority until it has responded to the GAO report and publishes a final    rulemaking that responds to the comments it received on an interim final rule published on January 7, 1998 (63 Fed. Reg. 687).  In the preamble to the instant rule, CMS responds to the    comments it received in response to the prior rulemaking.     Paperwork Reduction Act, 44 U.S.C.  3501-3520     The interim final rule does not contain any information collections that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act.     Statutory authorization for the rule     The interim final rule is promulgated under the authority contained in sections 1102, 1842(b)(8), 1842(b)(9), and 1871 of the Social Security Act.     Executive Order No. 12866     The interim final rule was reviewed by the OMB and found to be an economically significant regulatory action under the order.     Executive Order No. 13132 (Federalism)     The interim rule does not contain sufficient federalism implications to warrant the preparation of a Federalism Assessment.

## Downloads

Full Report (4 pages)

## GAO Contacts

### 

Shirley A. Jones
jonessa@gao.gov

(202) 512-5400

## Office of Public Affairs

### Media Inquiries

Sarah Kaczmarek
kaczmareks@gao.gov

(202) 512-4800

### Public Inquiries

Public Affairs
PublicAffairs@gao.gov

(202) 512-4800

## Related Pages

RelatedAppropriations LawRelatedBid ProtestsRelatedDecisions & FAQsRelatedThe Red BookRelatedContract Appeals BoardRelatedFederal Vacancies Reform ActRelatedCongressional Review Act - archivedReceive GAO Updates
    Stay informed as we add new reports & testimonies.  
        U.S. Government Accountability Office           v3.3.27 -  Column 1     -  Press Center 
  -  Contact Us 
  -  Inspector General 
  -  Restricted Reports 
-  Column 2     -  Copyright & Terms of Use 
  -  Privacy Policy 
  -  Accessibility 
  -  Sitemap 
-  Column 3     -  FOIA Requests 
  -  Scam Alerts 
  -  No FEAR Act Data 
  -  Health Care Advisory Committees