DEPARTivlENT OF H EALTH AND H UMAJ.'{ RVICE~ 

OFFICE OF INSPECTOR GENERAL 

WAS!l!NC;T ON, DC 20201 

MAY 0 3 2013 

TO: 	 Marilyn Tavenner 

Acting Administrator 

Centers for Medicare & Medicaid Services 

FROM: Stuart Wright. 

Deputy Inspector General 

for Evaluation and Inspections 

SUBJECT: 	 Memorandum Report: Medicare Payments for Part B Claims with 

G Modifiers, OEI-02-10-00160 

This memorandum report describes Medicare payments for Part B claims with 

G modifiers and how contractors process claims with these modifiers. Providers and 

suppliers use four G modifiers to indicate why claims may not be covered by Medicare. 

Providers file such claims when they need to document the use of services or items, or to 

provide information that may be required by other payers. Providers and suppliers use 

GA and GZ modifiers to indicate that they expect Medicare to deny the service or item as 

not "reasonable and necessary." For example, they may use these modifiers when they 

are unsure whether a beneficiary has reached a frequency limit that applies to certain 

services or items. Providers and suppliers use GY and GX modifiers to indicate that 

services or items are not covered by Medicare. 

SUMMARY 

In 2011, Medicare paid nearly $744 million for Part B claims with G modifiers that 

providers expected to be denied as not reasonable and necessary or as not being covered 

by Medicare . We found vulnerabilities in how Medicare pays for these claims. When 

processing claims, contractors often do not consider the modifiers that providers use to 

indicate that they expect the services or items to be denied as not reasonable and 

necessary. Contractors also do not always consider the modifiers that providers use to 

indicate that services or items are not covered by Medicare. Although contractors have 

checks that affect some of these claims, such as determining whether the services and 

items met Medicare frequency limitations, they do not specifically check for claims for 

which providers expect not to be paid. Further, we found that from 2002 to 2011, 

Medicare paid $4.1 million for claims that included inappropriate combinations of 

G modifiers. 

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 
Page 2 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160)

BACKGROUND

Medicare Part B covers a variety of services and items, including physician office visits, 

outpatient procedures, laboratory tests, and durable medical equipment, prosthetics, 

orthotics, and supplies (DMEPOS). Covered services and items must be reasonable and 

necessary for the diagnosis or treatment of illness or injury, or to improve the functioning 

of a malformed body part.1

 As discussed in more detail below, providers and suppliers 

use G modifiers to alert Medicare when they bill for services or items that they expect to 

be denied as either not reasonable and necessary (GA and GZ modifiers) or because they 

are not covered by Medicare (GY and GX modifiers). 

In a 2009 report, the Office of Inspector General (OIG) raised concerns about the use of 

GA and GZ modifiers and about Medicare inappropriately paying for some claims with 

these modifiers. The report looked at claims for pressure-reducing support surfaces and 

found that Medicare paid for 72 percent of all pressure-reducing support surface claims 

with GA or GZ modifiers.2 This amounted to over $4 million in potentially inappropriate 

payments.

GA and GZ Modifiers

Providers and suppliers use GA and GZ modifiers to bill for certain services or items that 

they expect to be denied as not reasonable and necessary.3 They may use these modifiers 

when they are uncertain about whether a claim should be paid. For example, a provider 

may not know whether a beneficiary already had a particular laboratory test that 

Medicare covers only once a year 4 or a supplier may suspect that the beneficiary already 

has the item it is providing.5 Providers and suppliers may also use these modifiers when 

they are certain that the claim should not be paid. For example, a provider may know 

that Medicare does not pay for a particular test for a beneficiary with a given condition, 

but because the beneficiary requests it, the provider submits the claim to Medicare for a 

decision.6 The beneficiary may need Medicare to deny the claim so that it can be 

submitted to the beneficiary’s secondary insurance. 

 1 Social Security Act § 1862(a)(1)(A), 42 U.S.C. § 1395y(a)(1)(A).

2 OIG, Vulnerabilities in Medicare Payments for Pressure Reducing Support Surfaces, OEI-02-07-00421, 

December 2009.

3 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, 20.9.1.1(E). The requirements 

concerning these modifiers also apply to Part B claims submitted by Part A providers. See CMS, Medicare 

Claims Processing Manual, Pub. No. 100-04, ch.1, § 60.4.2. 4 Medicare may not pay on a claim if it represents a test that exceeds a frequency limit. See CMS, Advance 

Beneficiary Notice of Noncoverage (ABN): Part A and Part B, May 2012. Accessed at 

http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network -

MLN/MLNProducts/downloads/abn_booklet_icn006266.pdf on April 1, 2013. 5 See e.g., Noridian Administrative Services LLC, “Proper Use of GY, GA, and GZ Modifiers,”

Happenings, August 2007. Accessed at 

https://www.noridianmedicare.com/dme/news/bulletins/happenings/issue6_aug07.pdf on February 14, 

2011. 

6 This type of claim is called a demand bill. See CMS, Medicare Claims Processing Manual, 

Pub. No. 100-04, ch. 1, § 60.3.2(B).
Page 3 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160)

GA Modifiers: Beginning in January 2002, Medicare required providers and suppliers to 

use the GA modifier for claims they expect to be denied as not reasonable and necessary 

for which they have on file an Advance Beneficiary Notice (ABN) signed by the 

beneficiary. One of the purposes of the ABN is to inform the beneficiary that Medicare 

certainly or probably will not pay for the service or item on that occasion. The 

GA modifier may be used only if a beneficiary signed an ABN indicating that he or she 

accepts liability for the cost of the service or item if Medicare does not pay for it. 

Medicare prohibits the routine use of ABNs. However, it does allow for certain 

exceptions, such as when a service or item has a frequency limit on coverage.7

 For 

example, laboratories may routinely use ABNs because Medicare places frequency 

limitations on many laboratory services and laboratories may not be able to determine

whether a beneficiary has already exceeded the limit for a test. 

GZ Modifiers: Beginning in January 2002, Medicare required providers and suppliers to 

use the GZ modifier for claims they expect to be denied as not reasonable and necessary 

for which they do not have an ABN on file.8 In these cases, if Medicare denies the claim 

as not reasonable and necessary, the beneficiary cannot be held liable for the cost of the 

service or item. Table 1 provides the definitions of GA and GZ modifiers for Part B 

claims.

Table 1: Definitions of GA and GZ Modifiers for Part B Claims

Modifier Definition

GA Service or item is not considered reasonable and necessary; ABN is on file

GZ Service or item is not considered reasonable and necessary; ABN is not on file

Source: CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, § 20.9.1.1(E).

GY and GX Modifiers

Beginning in January 2002, Medicare allowed providers and suppliers to use the

GY modifier to indicate that a service or item is not covered by Medicare, either because 

it is statutorily excluded (e.g., hearing aids) or does not meet the definition of any 

Medicare benefit (e.g., surgical dressings that are used to clean or protect intact skin).9

 

Because Medicare does not cover these services or items, the beneficiary is liable for 

payment. No ABN is required with the GY modifier. The provider or supplier may use 

this modifier when a beneficiary needs Medicare to deny the claim so that it can be 

submitted to the beneficiary’s secondary insurance.

 

In April 2010, Medicare established the GX modifier. It indicates that a service or item is 

statutorily excluded and that the provider or supplier voluntarily gave the beneficiary an 

 7 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 30, §§ 40.3.6 and 40.3.6.4(C). 8 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, § 20.9.1.1(E). 9 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, § 20.9.1.1(E). The requirements 

concerning these modifiers also apply to Part B claims submitted by Part A providers. See CMS, Medicare 

Claims Processing Manual, Pub. No. 100-04, ch.1, § 60.4.2.
Page 4 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160)

ABN.10 In 2010, Medicare provided instructions to contractors to automatically deny 

Part A claims with the GX modifier for noncovered charges.

11 Medicare has not issued 

similar instructions for Part B claims. Table 2 provides the definitions of GY and 

GX modifiers. 

Table 2: Definitions of GY and GX Modifiers for Part B Claims

Modifier Definition

GY

Service or item is statutorily excluded or does not meet the definition of any 

Medicare benefit; ABN is not required. 

GX

Service or item is statutorily excluded and the provider or supplier voluntarily 

notified the beneficiary with an ABN.

Source: CMS Program Memorandum, CR 1820; CMS, Medicare Claims Processing Manual, Pub. No. 100-04, 

ch. 23, § 20.9.1.1(E).

Medicare Part B Claims Processing 

CMS contracts with Medicare Administrative Contractors (MAC) to process and pay 

Part B claims.12 These contractors also apply claims processing “edits”—i.e., system 

checks—to prevent improper payments; conduct medical reviews and data analyses of 

claims; and conduct outreach and education to providers. Edits flag a claim for automatic 

denial or for contractor review to ensure that the claim is appropriate. 

CMS provides contractors with various instructions about how to process claims with 

G modifiers. CMS required contractors to automatically deny claims with GZ modifiers

for services or items that were provided on or after July 1, 2011.

13 Currently, CMS does 

not have any specific instructions for claims with GA modifiers, except for those 

submitted with both a GA and GZ modifier; CMS instructs contractors to treat such 

claims as unprocessable.14 For claims with GY modifiers, CMS allows contractors to 

deny these claims at their discretion. Finally, CMS has not issued instructions for 

processing Part B claims with GX modifiers. See Table 3.

Table 3: Processing Instructions for Part B Claims With G Modifiers

Modifier Processing Instructions

GA

Claims with both a GA and a GZ modifier for the same service or item should be treated 

as unprocessable.

GZ Effective July 1, 2011, GZ claims must be automatically denied. 

GY

Effective January 2002, claims with GY modifiers may be automatically denied at the 

discretion of the MACs.

GX No instructions.

Source: CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, § 20.9.1.1(E)(5) and (F).

 10 CMS, CR 6563, Transmittal 1921, Billing for Services Related to Voluntary Uses of Advanced 

Beneficiary Notices of Noncoverage (ABNs), February 19, 2010. 11 Ibid., Requirement Number 6563.5. 12 During the period of our review, CMS was transitioning the claims processing workload of other 

contractors—such as carriers and fiscal intermediaries—to the MACs. 13 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 23, § 20.9.1.1(F). 14 Ibid., ch. 1, § 20.9.1.1(E)(5).
Page 5 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 

METHODOLOGY

This study is based on an analysis of all Part B claims, including DMEPOS claims, with 

GA, GZ, GX, and GY modifiers for calendar year 2011. It is also based on structured 

interviews with staff at CMS and selected claims processing contractors. 

Analysis of Part B claims. Using CMS’s National Claims History File and Standard 

Analytical File, we analyzed all Part B claims with GA, GZ, GX, or GY modifiers from 

2011.15 We determined the number of claims with each of these modifiers, the number 

and percentage of these claims that Medicare paid, and the total amount Medicare paid 

for these claims. We also analyzed the services or items that were billed on these claims. 

We determined the types of services or items that had the largest numbers of paid claims 

and the amounts Medicare paid for each of these services or items. 

Next, we analyzed the number of paid claims that included inappropriate combinations of 

G modifiers. We did this analysis for all Part B claims with GA, GZ, GX, or 

GY modifiers from 2002 to 2011. We looked for combinations that represent 

inappropriate scenarios, such as when one modifier indicates that a service or item is not 

reasonable and necessary and the other modifier indicates that Medicare does not cover 

the service or item. For the purposes of this report, we use “providers” to refer to both 

providers and suppliers. 

Interviews with CMS staff and selected contractors. We conducted structured 

interviews with staff at CMS and selected claims processing contractors about how they 

use G modifiers. We also asked staff at each contractor whether they have any claims 

processing edits specific to claims with G modifiers and under what circumstances they 

review these claims. During the period of our review, CMS was transitioning the claims 

processing workload of other contractors, called carriers, to the MACs. For this review, 

we interviewed staff at the 13 MACs; these contractors processed 78 percent of all paid 

2011 claims with G modifiers.16 We conducted these interviews in September 2011. 

Standards

This inspection was conducted in accordance with the Quality Standards for Inspection 

and Evaluation approved by the Council of the Inspectors General on Integrity and 

Efficiency.

 

15 All analyses for GX are for the period from April 1, 2010—the date the GX modifier became effective—

to December 31, 2011. 16 The carriers processed the remaining 22 percent of claims.
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Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 

RESULTS

In 2011, Medicare paid nearly $744 million for Part B claims that providers 

expected to be denied as not reasonable and necessary or as not being covered by 

Medicare

Medicare paid for 16.5 million Part B claims with GA, GZ, GX, and GY modifiers. Most 

of these claims (98 percent) were submitted with GA modifiers. Another 2 percent of 

claims were submitted with GZ modifiers. Less than 1 percent of claims were submitted 

with GY and GX modifiers. See Table 4. 

Table 4: Part B Claims With G Modifiers, 2011

Modifier

Number of Paid

Claims

Percentage of Paid Claims 

With G Modifiers Total Amount Paid 

GA 16,165,721 97.7% $727,224,448 

GZ 352,735 2.1% $14,240,381 

GY 9,081 0.1% $1,043,755 

GX 16,914 0.1% $1,360,584 

Total 16,544,451 100% $743,869,168
Page 7 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 

In contrast to their processing of GA modifiers, almost all contractors reported having 

edits specific to GZ modifiers. Providers use GZ modifiers to indicate that they expect 

Medicare to deny a service or item as not reasonable and necessary and that they do not 

have an ABN on file. As previously noted, beginning in July 2011, CMS required 

contractors to automatically deny claims with GZ modifiers. While 12 contractors that 

we interviewed reported having edits to automatically deny claims with GZ modifiers, 

the remaining contractor did not. This contractor noted that it had other edits that affect 

some claims with GZ modifiers, such as edits to check that services and items met 

Medicare coverage requirements, but that it did not automatically deny all claims with 

GZ modifiers, as required. 

In 2011, Medicare paid for 26 percent of claims submitted with GZ modifiers, totaling 

$14.2 million. Almost all of these claims were for services or items provided before 

July 2011.18 As noted previously, CMS required contractors to automatically deny 

claims with GZ modifiers for service or items provided on or after July 1, 2011. About 

three-quarters of the paid claims with GZ modifiers were for laboratory tests. 

Contractors also do not always consider modifiers that providers use to indicate that 

services or items are not covered by Medicare

Providers use GY modifiers to indicate that either a service or item is statutorily excluded 

(e.g., eyeglasses) or that it does not meet the definition of any Medicare benefit (e.g., 

surgical dressings that are used to clean or protect intact skin rather than to cover an 

actual wound). Medicare gives contractors the discretion to automatically deny claims 

with GY modifiers. Eleven of the thirteen contractors we interviewed automatically 

denied these claims, while two contractors did not. One of these contractors reported 

that, instead of automatic denial, it had an edit in place that flags these claims for review. 

The other contractor reported that it had other edits that affect some claims with 

GY modifiers, such as edits to check that services and items met Medicare coverage 

requirements.

In 2011, Medicare paid for less than 1 percent of claims with GY modifiers, totaling 

$1 million. As shown in Table 4, the majority of paid claims with GY modifiers 

(87 percent) were for DMEPOS. Most of these claims were for accessories for 

prosthetics and orthotic devices. The next most common claims with GY modifiers were 

for enteral and parenteral nutrition; ambulance services; and drugs, such as vitamin B12 

injections. 

 

18 CMS paid for 0.10 percent of GZ claims for services or items provided on or after July 1, 2011, totaling 

$66,441 in payments. 
Page 8 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 

Table 5: Top Categories of Paid Part B Services and Items With GY Modifiers, 2011

Service or Item Category

Number of Paid 

Claims with 

GY Modifiers

Percentage of Paid 

Claims with 

GY Modifiers

Total Amount 

Paid

Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies

7,892 87% $624,560

Enteral and Parenteral Nutrition 783 9% $251,067 

Ambulance 177 2% $30,478 

Drugs 

(e.g., certain injections, including 

vitamin B12 and Ranibizumab)

130 1% $108,729 

Other Services and Items* 99 1% $28,920

 Source: OIG analysis of CMS claims data, 2012.

 * This includes several service and item categories that each accounted for 0.1 percent or less of all paid claims with GY modifiers. 

Providers use GX modifiers to indicate that the service or item is statutorily not covered 

by Medicare and they voluntarily notified the beneficiary with an ABN that he or she is 

liable for the claim. Medicare established the GX modifier in April 2010 for Part A 

claims. Medicare has not given instructions to contractors on how to process Part B 

claims with the GX modifier.19 

In 2011, Medicare paid for 11 percent of claims submitted with GX modifiers, totaling 

$1.3 million.20 In 2011, almost a third of the paid claims with GX modifiers were for 

imaging services, while 21 percent were for laboratory tests. Another 13 percent were for 

chiropractic services. 

Further, Medicare paid $4.1 million for Part B claims that included inappropriate 

combinations of G modifiers from 2002 to 2011 

With the exception of a GX modifier paired with a GY modifier, all other combinations 

of G modifiers on the same claim are inappropriate. From 2002 to 2011, Medicare paid 

$4.1 million for claims submitted with inappropriate G modifier combinations. Claims 

that contained both a GA and GY modifier made up the vast majority of these claims, 

totaling $3.9 million in payments. Claims with this combination indicate that the 

provider expects that the service or item is not reasonable and necessary and that it is not 

covered by Medicare. 

Medicare paid $89,973 for claims with the combination of a GA and GZ modifier. 

Including both modifiers is contradictory and indicates that the provider expects that 

claim to be denied as not reasonable and necessary and either provided an ABN (GA) or 

did not provide an ABN (GZ). Because contractors must automatically deny claims that 

include both GA and GZ modifiers, it is unclear why Medicare paid for these claims. 

 

19 CMS instructs contractors to automatically deny Part A claims with GX modifiers. See Requirement 

Number 6563.5 in CMS, CR 6563, Transmittal 1921, Billing for Services Related to Voluntary Uses of 

Advanced Beneficiary Notices of Noncoverage (ABNs), February 19, 2010. 20 This only includes Part B claims submitted with GX modifiers for service dates on or after April 1, 2010, 

the date CMS first allowed providers to use the GX modifier under its current definition.
Page 9 – Marilyn Tavenner

Medicare Payments for Part B Claims with G Modifiers (OEI-02-10-00160) 

CONCLUSION

This memorandum report describes Medicare payments for Part B claims with 

G modifiers and how contractors use these modifiers in their claims processing. 

In 2011, Medicare paid nearly $744 million for Part B claims with G modifiers. We 

found that vulnerabilities exist in how Medicare pays for these claims. When processing 

claims, contractors often do not consider the modifiers that providers use to indicate that 

they expect the services or items to be denied as not reasonable and necessary. 

Contractors also do not always consider the modifiers that providers use to indicate that 

services or items are not covered by Medicare. Although contractors have checks that 

affect some of these claims, such as determining whether the services and items met 

Medicare frequency limitations, they do not specifically check for claims providers 

expect not to be paid. Further, we found that Medicare paid $4.1 million for claims that 

included inappropriate combinations of G modifiers from 2002 to 2011. 

CMS needs to address the vulnerabilities presented in this report. We are aware that 

CMS developed a GU modifier for providers to use on claims for items and services for 

which the routine use of ABNs is appropriate, such as for services that are subject to 

frequency limitations. This is one way to address the problem in that it would allow 

providers to use the GA modifier solely for other items and services that they expect to be 

denied. CMS would then need to instruct contractors to automatically deny or review

claims with GA modifiers before paying them. To date, however, CMS has not issued 

any instructions about the GU modifier or how contractors should process these claims. 

CMS needs to either issue such instructions or develop other methods of addressing these 

program vulnerabilities. 

In addition, CMS needs to ensure that all contractors are following its instructions to 

automatically deny claims with GZ modifiers. CMS also needs to instruct contractors to 

automatically deny claims with GY modifiers and ensure that contractors follow these 

instructions. Further, CMS should decide whether to implement the GX modifier for

Part B claims, since providers are already using it. Lastly, CMS should ensure that 

contractors do not pay for claims with inappropriate combinations of G modifiers. OIG 

will continue to monitor claims with G modifiers and will undertake a review in the 

future if it appears that CMS has not addressed the problems presented in this report. 

This report is being issued directly in final form because it contains no recommendations. 

If you have comments or questions about this report, please provide them within 60 days. 

Please refer to report number OEI-02-10-00160 in all correspondence.
OEI-02-10-00160 Medicare Payments for Part B Claims with G Modifiers 10 

APPENDIX A 

Categories of Paid Part B Services and Items with GA Modifiers, 2011 

Service or Item Category

Number of Paid Claims 

with GA Modifiers

Percentage of Paid 

Claims with GA Modifiers

Total Amount 

Paid

Laboratory tests 8,321,058 51.5% $125,730,915 

Chiropractic 2,420,242 15.0% $78,382,437 

Standard imaging 1,157,186 7.2% $97,088,523 

Minor procedures 1,065,797 6.6% $54,151,802 

Office visits 728,031 4.5% $38,226,312 

Other drugs 448,512 2.8% $85,072,111 

Other tests 398,379 2.5% $18,110,098 

Other durable medical equipment

(DME) 210,823 1.3% $20,278,913 

Echography/ultrasonography 198,300 1.2% $29,801,792 

Immunizations/vaccinations 184,297 1.1% $4,187,908 

Prosthetic/orthotic devices 173,895 1.1% $29,453,648 

Ambulatory procedures 143,505 0.9% $10,166,348 

Advanced imaging 142,215 0.9% $54,802,485 

Specialist 122,787 0.8% $11,393,247 

Eye procedure 105,538 0.7% $16,944,745 

Wheelchairs 78,337 0.5% $8,083,403 

Endoscopy 58,991 0.4% $16,502,566 

Oxygen and supplies 41,824 0.3% $4,801,681 

Imaging/procedure 33,978 0.2% $1,872,673 

Hospital beds 23,859 0.2% $ 2,473,447 

Oncology 13,555 0.1% $1,170,745 

Anesthesia 12,346 0.1% $1,740,967 

Other 12,403 0.1% $827,033 

Ambulance 11,921 0.1% $2,499,763 

Medical/surgical supplies 11,633 0.1% $694,633 

Chemotherapy 10,374 0.1% $2,775,061 

Enteral and parenteral 9,729 0.1% $3,710,177 

Hospital visit 6,575 0.0% $751,710 

Undefined codes 5,186 0.0% $535,047 

Major procedure 6,393 0.0% $4,233,264 

Drugs administered through DME 3,875 0.0% $ 316,977 

Dialysis services 1,381 0.0% $181,084 

Nursing home visit 1,480 0.0% $140,068 

Home visit 1,268 0.0% $116,189 

Emergency room visit 47 0.0% $6,505 

Hearing and speech services 1 0.0% $171

 Total 16,165,721 100%* $727,224,448

Source: Office of Inspector General analysis of Centers for Medicare & Medicaid Services claims data, 2012.

*The rows do not sum to the total due to rounding.