Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

DUPLICATE MEDICAID AND 


MEDICARE HOME HEALTH 


PAYMENTS:
 

MEDICAL SUPPLIES AND 


THERAPEUTIC SERVICES
 

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 OIG’s 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. 
 

 

 

 

 

 

Δ EXECUTIVE SUMMARY 

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 

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EXECUTIVE SUMMARY 

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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EXECUTIVE SUMMARY 

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 Medicare’s 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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Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

INTRODUCTION ........................................... 1 
 

FINDINGS ................................................. 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 
 

RECOMMENDATIONS ..................................... 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 
 

ACKNOWLEDGMENTS .................................... 21 
 
 

 

 

 

Δ INTRODUCTION 

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 services—speech, occupational, and physical therapy 

and medical social services; and 

•	 assistive services—home 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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INTROD U C T I O N 

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, Maryland’s 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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INTRODUCTION 

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 

State Nonroutine Medical 

Supplies (Dollars) 

Nonroutine Medical 

Supplies (Claims) 

Therapeutic 

Services 

(Dollars) 

Therapeutic 

Services 

(Claims) 

Florida 

Maryland 

North Carolina 

Ohio 

Texas 

$10,902,160 

$5,333 

$3,170,079 

$9,765,963 

$13,351,263 

103,382 

136 

90,659 

90,241 

547,933 

$3,436,109 

$53,304 

$7,750,288 

$12,847,646 

$51,554,385 

51,397 

1,239 

77,631 

184,593 

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 

State Routine Medical Supplies 

(Dollars) 

Routine Medical Supplies 

(Claims) 

Florida 

Maryland 

North Carolina 

Ohio 

Texas 

$2,173 

$0 

$11,053,572 

$1,068 

$60,782,007 

37 

$0 

91,890 

7 

551,527

 Total $71,838,820 643,461 

Source: Office of Inspector General analysis of State Medicaid claims data, 2007. 

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INTROD U C T I O N 

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 Beneficiaries—State 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 

OEI-07-06-00640 

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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INTRODUCTION 

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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INTROD U C T I O N 

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 beneficiary’s 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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INTRODUCTION 

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 President’s 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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Δ FINDINGS 

In four of the five States reviewed, Medicaid 

inappropriately paid a combined $1 million in 

2005 for nonroutine medical supplies and 

therapeutic services that were paid by Medicare 

Four of the five States included in 

our review made $1 million in 

Medicaid payments for 

84,061 claims in 2005 for 

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 Texas’s 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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FINDINGS 

Table 3: Inappropriately Paid Medicaid 

Nonroutine Medical Supplies 

State Dollars Claims 

Florida 

Maryland 

North Carolina 

Ohio

Texas 

$16,009 

$0 

$15,847 

 $0 

$770,183 

212 

0 

450 

0 

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 

Maryland 

North Carolina 

Ohio

Texas 

$0 

$0 

$14,891 

 $67,694 

$136,540 

0 

0 

149 

967 

864

 Total $219,125 1,980 

Source: OIG analysis of State Medicaid claims data, 2007. 

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F I NDING S 

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 

Two States paid $6.6 million 

for 74,648 claims for routine 

medical supplies on the 

same dates as therapeutic or 

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 

Maryland 

North Carolina 

Ohio 

Texas 

$0 

$0 

$164,231 

$0 

$6,486,272 

0 

0 

1,780 

0 

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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F I NDING S 

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. 

All States reported having controls to prevent 

duplicate payments, but these did not eliminate 

all inappropriate payments 

Prior to our review, all five States 

had established 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. 

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 populated—the 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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F I NDING S 

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. 

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 

Officials in the reviewed States 

indicated that they did not have 

direct access to Medicare PPS 

payment data, which would 

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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FINDINGS 

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 codes—for 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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Δ RECOMMENDATIONS 

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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RECOMMENDATIONS 

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 

Privacy 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 Medicare’s 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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RECOMMENDATIONS 

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 Maryland’s 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. Maryland’s 

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 CMS’s comments. 

The full text of CMS’s comments is provided in Appendix B. 

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Δ APPENDIX ~ 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 patient’s 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 staff’s 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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Δ APPENDIX ~ B 

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APPENDIX B 
 

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APPENDIX B 
 

 

APPENDIX B Δ ACKNOWLEDGMENTS 

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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