United States General Accounting Office

GAO Report to Congressional Requesters

September 1995 DURABLE MEDICAL

EQUIPMENT

Regional Carriers’

Coverage Criteria Are

Consistent With

Medicare Law

GAO/HEHS-95-185

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-258071 

September 19, 1995

The Honorable William V. Roth, Jr.

Chairman

The Honorable Daniel P. Moynihan

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable Bill Archer

Chairman

The Honorable Sam M. Gibbons

Ranking Minority Member

Committee on Ways and Means

House of Representatives

The Honorable Thomas Bliley, Jr.

Chairman

The Honorable John D. Dingell

Ranking Minority Member

Committee on Commerce

House of Representatives

In November 1993, the Health Care Financing Administration (HCFA) began

consolidating the work of processing and paying claims for durable

medical equipment, prostheses, orthoses, and supplies (DMEPOS) at four

regional carriers. Before November 1993, claims for such items were

processed and paid by local Medicare carriers. The local carriers generally

serve a state and they continue to process and pay most other Medicare

part B claims.

As part of the transition to regional processing, the four regional carriers

developed coverage criteria for DMEPOS. Certain groups representing

disabled Medicare beneficiaries were concerned that these criteria and

their implementation by regional carriers would prevent disabled persons

from receiving needed DMEPOS.

In 1993, the Medicare population was about 36 million persons; about 90

percent of those were eligible for Medicare benefits because of age (65

years old and older) and the remaining 10 percent were eligible because of

Page 1 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
B-258071 

disability.1 In 1993, Medicare paid about $2.7 billion for DMEPOS (including

oxygen services and supplies).

Your committees asked us to study whether the regional carriers’ coverage

criteria have adversely affected disabled beneficiaries’ access to

customized DMEPOS. In response to that request, we reviewed (1) national

Medicare requirements and the regional carriers’ coverage criteria and

(2) how the criteria have been applied to claims. Specifically, we reviewed

the four regional carriers’ DMEPOS coverage criteria, including those for

customized items, and compared them with Medicare’s national coverage

criteria and the requirements of Medicare law. We also compared the local

carriers’ coverage criteria for wheelchairs, prostheses, and orthoses from

nine states with the criteria developed by the regional carriers. To

determine if the criteria are being applied consistently, we compared the

percentages of DMEPOS claims approved by local and regional carriers for

aged and disabled beneficiaries. For additional details on our objective,

scope, and methodology, see appendix I.

Results in Brief The final criteria adopted by the regional carriers are consistent in all

material respects with Medicare’s national coverage criteria and Medicare

law. We do not believe that the regional carriers’ criteria have impeded

disabled beneficiaries’ access to customized DMEPOS.

In 1994, the regional carriers approved DMEPOS claims for disabled

Medicare beneficiaries at a similar rate as for aged beneficiaries, and there

is no apparent difference in the application of the criteria between

disabled and aged Medicare beneficiaries. Further, from January 1992

through September 1994 the differences in approval rates between aged

and disabled beneficiaries narrowed.

Some groups representing disabled persons have stated that the disabled

need items to accommodate a more active lifestyle than aged

beneficiaries. HCFA has taken the position that Medicare law restricts

coverage to standard items unless the beneficiary’s physician prescribes

and justifies lightweight materials or customized items on medical

grounds. HCFA’s position is consistent with current law.

1

Disabled persons, regardless of age, qualify for Medicare coverage after being entitled to Social

Security disability benefits for 24 months.

Page 2 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
B-258071 

Background DMEPOS include a variety of items. Durable medical equipment includes

wheelchairs, walkers, canes, and oxygen systems. Customized wheelchairs

are the most common kind of customized durable medical equipment.

Prostheses are replacement body parts (such as artificial limbs) and

orthoses are braces. Many of these items must also be customized for the

individual. Supplies include disposable items, such as wound dressings

and catheters and associated tubing.

In November 1991, HCFA (the agency within the Department of Health and

Human Services responsible for administering Medicare) announced its

intention to concentrate the responsibility for processing and paying

claims for DMEPOS at four regional carriers. The transfer from local to

regional carriers began in November 1993 and was completed in

July 1994.2

In announcing the change to regional carriers, HCFA said that it hoped to

achieve greater consistency in coverage decisions for DMEPOS. HCFA

expected that regional carriers would have sufficient claims volume to

employ experts on DMEPOS who would apply coverage criteria more

consistently than the local carriers. In its announcement, HCFA said that it

had received complaints from beneficiaries and suppliers that the local

carriers were paying incorrect amounts and were applying different

interpretations of coverage criteria to DMEPOS claims.

In the spring of 1993, the four regional carriers published draft medical

review criteria for comment. These criteria described the conditions under

which claims would be approved for payment. Certain groups representing

Medicare beneficiaries expressed concern that the regional criteria might

be overly restrictive and disabled beneficiaries might be denied access to

needed DMEPOS.

Regional Carriers’

Coverage Criteria Are

Consistent With

National Criteria and

Law

The final coverage criteria adopted by the regional carriers in August 1993

are consistent with Medicare’s existing national coverage criteria and the

law governing the Medicare program. Moreover, the criteria are more

consistent across the regional carriers than the criteria formerly used by

local carriers.

We compared the regional carriers’ criteria with all existing national

Medicare criteria and those sections of the law that deal with DMEPOS to

2

See appendix II for a list of the regional carriers and their service areas.

Page 3 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
B-258071 

assess conformity. We found that the regional carriers’ criteria comply in

all material respects with Medicare criteria.

As part of their process for drafting coverage criteria, in the spring of 1993

the regional carriers furnished their draft DMEPOS coverage criteria to

suppliers, physicians, other health professionals, and interest groups for

their review and comment. The regional carriers revised and finalized their

coverage criteria after considering the comments received.

Also, the regional carriers looked at the coverage criteria formerly used by

the local carriers when drafting their own criteria. We compared several

local carriers’ coverage criteria for wheelchairs, prostheses, and orthoses

with the regional criteria to see if the regional criteria were more

restrictive. We reviewed the coverage criteria of carriers serving nine

states3

 and concluded that the regional coverage criteria were not

significantly more restrictive than the local carriers’ criteria in these

states.

We also found that the regional carriers’ coverage criteria were more

consistent with one another than were the local carriers’ criteria. This is

illustrated by the criteria applicable to motorized wheelchairs from the

nine states we reviewed. One local carrier’s criteria for motorized

wheelchairs required an evaluation of the patient’s condition and a

prescription by a specialist in physical medicine, orthopedic surgery,

neurology, or rheumatology, but the other carriers did not require the

prescribing physician to be of a particular specialty. In addition, some

local carriers’ criteria required medical evidence that the beneficiary was

bed- or chair-confined and was unable to operate a manual wheelchair, but

other carriers required only that the beneficiary was unable to operate a

manual wheelchair.

The four regional carriers’ criteria adopted a blend of parts of the local

carriers’ criteria and require that all the following conditions be met for

coverage of a motorized wheelchair:

• without the wheelchair, the beneficiary would be bed- or chair-confined,

• the wheelchair must be medically necessary and the beneficiary must be

unable to operate the wheelchair manually, and

• the beneficiary must be capable of safely operating the controls of the

wheelchair.

3

The nine states are identified in appendix II.

Page 4 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
B-258071 

The regional carriers’ criteria require that the documentation of medical

necessity be completed by a physician, but they do not require that the

physician be of a certain specialty.

Concerns of Disabled

Interest Groups

Certain groups representing disabled beneficiaries stated that these

beneficiaries did not always get the DMEPOS items they desired. The groups

said that the people they represent are generally younger and more active

than elderly Medicare beneficiaries and that many disabled people hold

jobs and like to engage in activities outside the home, such as sports.

Some groups said that disabled beneficiaries would like to have

wheelchairs and prostheses made of lightweight materials, which often

cost substantially more than standard items. Another group said that some

beneficiaries would like to have more than one wheelchair, such as a

standard one for use around the home plus a power wheelchair to

facilitate getting to and from classes on a college campus or for shopping,

or a lightweight wheelchair for sports.

HCFA’s policy is that Medicare will only pay for standard items for

beneficiaries unless the beneficiary’s physician prescribes and justifies

lightweight materials or customized items on medical grounds. Thus,

Medicare will not pay for items that accommodate active lifestyles, such as

items manufactured of lightweight materials or with custom features. Also,

Medicare will pay for one wheelchair, but backup wheelchairs will be

denied. We believe that these policies are consistent with current

Medicare law.

Although the regional criteria comply with Medicare’s existing national

policies, some people may find that items approved by local carriers in the

past may no longer be approved and, conversely, regional carriers may

approve items that some local carriers had denied. In anticipation of such

a development, HCFA established a grandfather clause for current

recipients of DMEPOS. Thus, Medicare beneficiaries who had items

approved by their local carrier in the past will remain eligible for

reimbursement for those items from the regional carrier; however,

first-time claims will be reviewed using the regional carriers’ criteria.

Page 5 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
B-258071 

In 1994, Regional

Carriers Approved

Similar Percentages of

DMEPOS Services for

Disabled and Aged

Beneficiaries

To see if the regional carriers’ criteria were affecting disabled and aged

beneficiaries differently, we obtained paid claims data covering

January 1992 through September 1994. Disabled Medicare beneficiaries

had a similar but somewhat lower percentage of DMEPOS claims approved

for payment as did the aged during that period. Further, the difference in

percentages generally narrowed by 1994, when regional carriers processed

claims.

Table 1 shows the percentage of claims that carriers allowed by region and

nationwide. For calendar years 1992 and 1993, the claims were processed

by local carriers, which we grouped into regions to correspond with the

regional carriers. In 1994, claims were processed by the regional carriers.

Table 1: Percentage of DMEPOS

Claims Allowed for Aged and Disabled

Beneficiaries, by Region and

Nationwide (1992-94) 

1992 1993 1994 (Jan.-Sept.)

Area Aged Disabled Aged Disabled Aged Disabled

Region A 74 65 77 70 95 91

Region B 76 69 80 74 89 81

Region C 79 73 80 76 95 92

Region D 78 68 76 67 92 86

Nationwide 77 69 79 72 93 87

Note: See appendix III for the number of claims.

We identified certain items frequently claimed by disabled beneficiaries

from 1992 to 1994. The carriers allowed similar percentages of claims for

disabled and aged beneficiaries for these items, with a narrowing of the

differences between the groups by 1994, when claims were processed by

regional carriers. (See table 2.)

Table 2: Percentage of Selected

DMEPOS Items Allowed for Aged and

Disabled Beneficiaries, Nationwide

(1992-94) 

1992 1993 1994 (Jan.-Sept.)

Item Aged Disabled Aged Disabled Aged Disabled

Customized

wheelchair 50 57 52 61 47 46

Lightweight

wheelchair 79 74 82 78 96 96

“Flex foot”

prosthesis 85 79 88 86 98 97

Note: See appendix III for the number of items.

Page 6 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
B-258071 

Conclusions The coverage criteria adopted by the regional carriers are consistent with

Medicare’s national coverage policies and law. Also, in 1994 the regional

carriers approved a similar percentage of DMEPOS services for disabled and

aged Medicare beneficiaries, so there was no significant difference in

access to DMEPOS services between disabled and aged Medicare

beneficiaries.

Agency Comments The Department of Health and Human Services had no comments

following its review of this report.

We are sending copies of this report to the Secretary of Health and Human

Services and other interested parties. We also will make copies available

to others upon request.

If you have any questions about this report, please call me at

(202) 512-7119. Other major contributors to this report are listed in

appendix IV.

Sarah F. Jaggar

Director, Health Financing

 and Public Health Issues

Page 7 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Contents

Letter 1

Appendix I 

Objective, Scope, and

Methodology

10

Appendix II 

Names and Addresses

of Regional Carriers

and Their Service

Areas

11

Appendix III 

DMEPOS Services

Allowed for Aged and

Disabled Beneficiaries

(1992-94)

13

Appendix IV 

Major Contributors to

This Report

14

Tables Table 1: Percentage of DMEPOS Claims Allowed for Aged and

Disabled Beneficiaries, by Region and Nationwide

6

Table 2: Percentage of Selected DMEPOS Items Allowed for Aged

and Disabled Beneficiaries, Nationwide

6

Table III.1: DMEPOS Claims Allowed by Region and Nationwide 13

Table III.2: Selected DMEPOS Items, Nationwide 13

Abbreviations

DMEPOS durable medical equipment, prostheses, orthoses, and

supplies

HCFA Health Care Financing Administration

Page 8 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Page 9 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Appendix I 

Objective, Scope, and Methodology

The objective of this assignment was to determine if Medicare carriers’

coverage criteria adversely affected disabled beneficiaries’ access to

customized DMEPOS.

To address this objective, we reviewed the four regional carriers’ DMEPOS

coverage criteria, including those for customized items, and assessed

whether they complied with Medicare’s established national coverage

criteria. In addition, for nine states we reviewed the local carriers’

coverage criteria, as provided to the regional carriers, relating to

wheelchairs, prostheses, and orthoses. The states were selected to

represent states with relatively high Medicare populations and each of the

four regions. Also, we interviewed HCFA officials, the medical director of

one of the regional carriers, four consumer groups representing disabled

persons, and two DMEPOS suppliers about whether regional carriers were

unreasonably restricting access to DMEPOS for disabled Medicare

beneficiaries.

The statistical information in this report was developed from a

computerized database of paid DMEPOS claims for calendar years 1992 and

1993 and January through September 1994 that we obtained from HCFA.

The 1994 data were the most current available at the time of our request to

HCFA. We extracted records for 220 DMEPOS items for which there were

allowed charges in each year from 1992 to 1994. The total allowed charges

for these 220 items represented about 91 percent of the total allowed

charges for all DMEPOS items from 1992 through September 1994, excluding

oxygen services. Oxygen services are relatively high-volume, high-dollar

DMEPOS, but we excluded them from our analysis because, while oxygen

services are individualized, they are not customized like wheelchairs,

prostheses, or orthoses.

Our work, which was conducted from October 1993 to July 1995, was

performed in accordance with generally accepted government auditing

standards.

Page 10 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Appendix II 

Names and Addresses of Regional Carriers

and Their Service Areas

Travelers Insurance Co.4

Wilkes-Barre, PA

(Region A)

Connecticut

Delaware

Maine

Massachusetts

New Hampshire

New Jersey

New York5

Pennsylvania5

Rhode Island

Vermont

Adminastar Federal, Inc.

Indianapolis, IN (Region B)

District of Columbia

Illinois5

Indiana

Maryland

Michigan5

Minnesota

Ohio

Virginia

West Virginia

Wisconsin

Palmetto Government

Benefits Administrators

Columbia, SC (Region C)

Alabama

Arkansas

Colorado

Florida5

Georgia

Kentucky

Louisiana

Mississippi

New Mexico

North Carolina

Oklahoma

Puerto Rico

South Carolina

Tennessee

Texas5

Virgin Islands

4

The Travelers changed its name to MetraHealth Insurance Company on January 4, 1995.

5

One of the nine states studied in our review.

Page 11 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Appendix II 

Names and Addresses of Regional Carriers

and Their Service Areas

Connecticut General Life

Insurance Co. (CIGNA)

Nashville, TN (Region D)

Alaska

American Samoa

Arizona

California5

Guam

Hawaii

Idaho

Iowa

Kansas

Mariana Islands

Missouri5

Montana

Nebraska

Nevada

North Dakota

Oregon

South Dakota

Utah

Washington5

Wyoming

5

One of the nine states studied in our review.

Page 12 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Appendix III 

DMEPOS Services Allowed for Aged and

Disabled Beneficiaries (1992-94)

Table III.1: DMEPOS Claims Allowed by

Region and Nationwide (in Thousands) 1992 1993 1994 (Jan.-Sept.)

Area Aged Disabled Aged Disabled Aged Disabled

Region A 3,215 385 2,685 346 1,294 164

Region B 2,416 350 2,315 346 1,934 304

Region C 5,401 721 4,700 689 2,727 432

Region D 3,192 448 2,272 365 1,231 177

Nationwide 14,224 1,904 11,972 1,746 7,186 1,077

Table III.2: Selected DMEPOS Items,

Nationwide 1992 1993 1994 (Jan.-Sept.)

Item Aged Disabled Aged Disabled Aged Disabled

Customized

wheelchair 4,096 7,735 2,177 2,979 136 128

Lightweight

wheelchair 312,231 35,450 311,628 33,843 192,924 24,275

“Flex foot”

prosthesis 967 763 950 756 496 497

Page 13 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
Appendix IV 

Major Contributors to This Report

Thomas Dowdal, Assistant Director, (202) 512-6588

Michael Piskai, Evaluator-in-Charge

Jerry Baugher

Mary Ellen Fleischman

Roger Hultgren

(106417) Page 14 GAO/HEHS-95-185 DMEPOS for Medicare Beneficiaries
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