Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

SEPTEMBER 1998 

OEI-04-97-00490 

CHIROPRACTIC CARE 

Controls Used by Medicare, Medicaid, and 

Other Payers 
OFFICE OF INSPECTOR GENERAL 

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

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

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

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

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

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

effectiveness of departmental programs. 

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

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

Principal OEI staff included: 

REGION 

Dwayne Grant, Program Analyst

Greg Jones, Program Analyst

Graham D. Rawsthorn, Program Analyst

Betty Apt, Team Leader

HEADQUARTERS 

Alan Levine, Program Specialist

Brian Ritchie, Technical Support Analyst

Barbara Tedesco, Statistician

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

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

http://www.dhhs.gov/progorg/oei 
EXECUTIVE SUMMARY

PURPOSE 

To describe how Medicare, Medicaid, and private insurers control chiropractic benefits. 

BACKGROUND 

The Balanced Budget Act of 1997 required the Health Care Financing Administration (HCFA) 

establish new utilization guidelines for Medicare chiropractic care by January 1, 2000. It also 

eliminated the X-ray requirement. In addition, New York recently enacted legislation requiring 

private insurers to include chiropractic coverage in their benefits packages. 

We initiated two inspections to better understand the impact of these changes on the Medicare 

and Medicaid programs and to learn more about utilization controls. This report, 

"CHIROPRACTIC CARE: Controls Used by Medicare, Medicaid, and Other Payers, (OEI-04-

97-00490)" describes Medicare, Medicaid, and private insurers' mechanisms for controlling 

expenditures and protecting the chiropractic benefit from potential waste and abuse. A 

companion report, "CHIROPRACTIC CARE: Medicaid Coverage, (OEI-06-97-00480)" 

describes current and expected chiropractic care benefits under State Medicaid programs. 

Medicare, Medicaid, and private insurers do not consider control of chiropractic benefits a high 

priority or an area of major concern. All commented that more could be done to control 

utilization of the benefit but that resources are better spent controlling other more costly benefits. 

FINDINGS 

We found that Medicare, Medicaid, and private insurers rely on utilization caps, X-rays, physician 

referrals, co-payments, and post and prepayment reviews, in varying degrees, to control utilization 

of chiropractic benefits. Utilization caps are the most widely used, but these and other controls 

did not detect or prevent unauthorized Medicare maintenance treatments. 

Utilization Caps Are the Most Widely Used Control Mechanisms 

Ninety-five percent of Medicare and 46 percent of Medicaid programs use soft caps that can be 

exceeded with appropriate justification. Hard caps, which cannot be exceeded, are used by 50 

percent of Medicaid programs and 94 percent of private insurers. Federal costs for Medicaid 

chiropractic benefits can exceed those for Medicare because Medicaid utilization caps are 

typically higher than those for Medicare. 

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X-rays Provide Little Control of Chiropractic Benefits 

Few private insurers or Medicaid agencies require X-rays to document treatment necessity. 

Medicare currently requires X-rays; however, elimination of the X-ray requirement should have 

little impact on chiropractic controls since most contractors do not use X-rays as a control 

mechanism. 

Physician Referral Is Commonly Used as a Control Mechanism for Managed Care, but Not 

for Fee-For-Service Plans 

Sixty-eight percent of Medicaid and 66 percent of private managed care organizations used 

physician referrals to help control chiropractic utilization. However, only 8 percent of Medicaid 

and 9 percent of private fee-for-service plans required physician referrals. None of the Medicare 

fee-for-service plans required physician referrals. 

Co-payments, Coinsurance, and Deductibles are Used to Help Control Chiropractic Benefits 

by Medicare and Private Insurers, but Not by Medicaid 

Private insurers’ co-payments ranged from $5 to $15 while Medicare coinsurance equaled 20 

percent of approved charges. Both private insurers and Medicare used annual deductibles. 

Private insurers’ deductibles ranged from $200 to $500 and Medicare’s deductible equaled $100. 

Prepayment Reviews Do Not Control Chiropractic Benefits 

Medicare and Medicaid contractors typically do prepayment reviews, however, it is basically a 

forms verification process. For those claims that exceed the soft caps, Medicare and Medicaid 

medical necessity prepayment reviews are mostly paper audits. 

Post Payment Reviews are Used by Medicaid, but Not by Medicare, to Help Control 

Chiropractic Benefits 

Sixty-five percent of Medicaid contractors use post payment reviews to help control chiropractic 

utilization. Medicare contractors, however, rarely conduct post payment reviews of chiropractic 

claims. 

Unauthorized Chiropractic Maintenance Treatments are Not Detected and Prevented 

HCFA policies preclude Medicare reimbursements for chiropractic maintenance treatments. 

However, only 40 percent of Medicare respondents claimed to do utilization reviews to identify 

and prevent such treatments. Our analysis identified over $68 million in probable chiropractic 

maintenance treatments in 1996. If left unchecked, this could result in as much as $447 million in 

improper Medicare payments from 1998 through 2002. 

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RECOMMENDATIONS 

This report describes controls used by Medicare, Medicaid, and other payers for chiropractic 

benefits. Utilization caps were the most widely used control mechanism. Needless to say, their 

intent is to limit the quantity of services. However, neither the utilization caps, nor any of the 

other controls, detected and prevented reimbursements for unauthorized Medicare chiropractic 

maintenance treatments. 

Accordingly, we recommend that HCFA develop system edits to detect and prevent unauthorized 

payments for chiropractic maintenance treatments. HCFA may do so by: 

! requiring chiropractic physicians to use modifiers to distinguish the categories of the spinal 

joint problems (i.e. acute, exacerbation, recurrence, and chronic), and 

! requiring all Medicare contractors to implement system utilization frequency edits to 

identify beneficiaries receiving consecutive months of minimal therapy. 

COMMENTS 

The HCFA Administrator, the Assistant Secretary for Planning and Evaluation (ASPE), and the 

Assistant Secretary for Management and Budget (ASMB) commented on our report. The full 

text of their comments are in appendix C. 

The HCFA concurred with our recommendations. The Balanced Budget Act of 1997 required 

HCFA to develop utilization guidelines for chiropractic care. In developing such guidelines, 

HCFA will develop modifiers to distinguish categories of spinal joint problems, and utilization 

frequency edits as we recommended. 

ASPE agreed that edits to identify inappropriate billings seemed desirable. However, ASPE 

commented that our use of “averages,” on pages four through six, to summarize the range of 

utilization caps was inappropriate because they did not reflect “real practice.” Our report 

provides the reader both the average utilization caps and the actual utilization caps for all 

Medicare and Medicaid respondents. 

Further, ASPE suggested that more information is needed to substantiate two State Medicaid 

Administrators’ claims that physician referrals are effective controls for chiropractic services. 

Specifically, ASPE wanted to know how these States measured effectiveness. Additionally, 

ASPE noted that it would be helpful to know how the use of chiropractic services is distributed 

between managed care and fee-for-service providers. These questions were not part of the scope 

of this study. However, we plan to continue our analysis of chiropractic services and utilization in 

the future. These and other questions are likely topics for inclusion in future analysis. 

ASMB expressed serious concerns about the methodology we used to estimate payments for 

probable inappropriate chiropractic maintenance treatments. Specifically, ASMB was concerned 

about our use of a 10 percent estimate to represent the Medicare population who received 

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chiropractic care for chronic conditions. The 10 percent estimate, furnished by the American 

Chiropractic Association, is a universal percentage estimate of the population at large. 

Demographic data and specific analysis is not available to differentiate between the Medicare 

population and the population at large. However, we contacted several Medicare Carrier Medical 

Directors who stated, based on their reviews of Medicare chiropractic claims, that the 10 percent 

appeared to be a reasonable estimate for the Medicare population. 

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TABLE OF CONTENTS

PAGE

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

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

FINDINGS ................................................................ 4

Utilization Caps ........................................................... 4

X-rays .................................................................. 7

Physician Referral .......................................................... 7

Co-payments, Coinsurance, and Deductibles ...................................... 8

Prepayment Reviews ........................................................ 9

Post Payment Reviews ..................................................... 10

Maintenance Treatments .................................................... 10

RECOMMENDATIONS ................................................... 13

COMMENTS ............................................................ 14

APPENDICES 

Scope and Methodology ................................................... A-1

Probable Maintenance Charges .............................................. B-1

Comments ............................................................. C-1
INTRODUCTION

PURPOSE 

To describe how Medicare, Medicaid, and private insurers control chiropractic benefits. 

BACKGROUND 

Chiropractic Treatment 

Chiropractic treatment is becoming more commonplace with consumers, and gaining wider 

acceptance in the medical profession. Chiropractors treat neuromusculoskeletal disorders and 

related functional clinical conditions including, but not limited to, back pain, neck pain and 

headaches. Chiropractic care is most commonly sought for treatment of back pain. Back pain is 

one of the most common and costly problems affecting adults. An estimated 50 percent of adults 

experience back pain each year and almost 20 percent have frequent back pain. 

A common chiropractic treatment for low back pain is spinal manipulation. Chiropractors use 

either their hands or hand held devices to perform manual spinal manipulations. Manual 

manipulations are most commonly performed to correct a subluxation of the spine. According to 

chiropractic theory, a subluxation is an incomplete dislocation, off centering, misalignment, 

fixation or abnormal spacing of vertebrae or intervertebral units. The Department of Health and 

Human Services, Agency for Health Care Policy and Research, has documented spinal 

manipulation to be a recommendable method of symptom control for low back pain in adults.1 

Growth in Number of Chiropractors 

The chiropractic profession is licensed in all States and the District of Columbia. All licensed 

chiropractors are entitled by law to use either the title doctor of chiropractic or chiropractic 

physician. Approximately 55,000 chiropractors actively practice today, while less than 14,000 

existed in 1970, according to the U.S. Census. The number of chiropractors has outgrown the 

U.S. population by three-fold. In 1970, almost seven chiropractors practiced per 100,000 U.S. 

residents. By 1997, this had increased to over 20 chiropractors per 100,000 residents. 

Medicare Chiropractic Eligibility 

In 1965, title XVIII of the Social Security Act created Medicare to provide health insurance for 

people 65 and over, people who are disabled, and persons with permanent kidney failure. 

Medicare has two parts: Hospital Insurance (Part A) and Medical Insurance (Part B). In 1972, 

Section 273 of the Social Security Amendment (P.L. 92-603) expanded the definition of physician 

under Part B of Medicare to include chiropractors. This made chiropractors eligible to participate 

1 Agency for Health Care Policy and Research, Pub No. 95-0642, December 1994, Acute Low Back 

Problems in Adults 

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in the Medicare program. However, the only Medicare reimbursable chiropractic treatment is 

manual manipulation of the spine to correct a subluxation demonstrated by X-ray. 

Medicaid Chiropractic Eligibility 

In 1965, title XIX of the Social Security Act created Medicaid as a program to provide medical 

assistance for certain individuals and families with low incomes and resources. This program is 

jointly funded by the Federal and State governments. Within broad Federal guidelines each State 

(1) establishes its own eligibility standards, (2) sets the type, amount, duration, and scope of 

services, (3) establishes rate of payment for services, and (4) administers the program. 

In 1972, when chiropractors were recognized as physicians and became eligible to participate in 

Medicare, chiropractors also became eligible to participate in Medicaid. Under Medicaid, 

however, chiropractic services are not a mandatory benefit, but rather an optional service. 

Therefore, it is within each State’s discretion whether to include chiropractic services in their 

Medicaid program. If offered, each State also establishes its own levels of services. However, 

according to Federal policy for Medicaid, chiropractic services should be limited to manual 

manipulation of the spine and X-ray services. Currently, 30 State Medicaid fee-for-service 

programs offer chiropractic services. 

Private Insurers Chiropractic Benefits 

Many private insurers now offer chiropractic benefits. The scope of chiropractic services are 

consumer driven. We found insurance plans ranging from no chiropractic coverage to substantial 

chiropractic coverage. Several insurers stated that they view the chiropractic benefit as a service 

they must provide to remain competitive. Moreover, they expect users of chiropractic services to 

“max-out” the benefit each year. 

Chiropractic Controls 

The Balanced Budget Act of 1997 required the Health Care Financing Administration (HCFA) 

establish new utilization guidelines for Medicare chiropractic care by January 1, 2000. It also 

eliminated the X-ray requirement. In addition, New York recently enacted legislation requiring 

private insurers to include chiropractic coverage in their benefits packages. 

We initiated two inspections to better understand the impact of these changes on the Medicare 

and Medicaid programs and to learn more about utilization controls. This report, 

"CHIROPRACTIC CARE: Controls Used by Medicare, Medicaid, and Other Payers, (OEI-04-

97-00490)" describes Medicare, Medicaid, and private insurers' mechanisms for controlling 

expenditures and protecting the chiropractic benefit from potential waste and abuse. A 

companion report, "CHIROPRACTIC CARE: Medicaid Coverage, (OEI-06-97-00480)" 

describes current and expected chiropractic care benefits under State Medicaid programs. 

Medicare, Medicaid, and private insurers all use a variety of mechanisms to help control their 

chiropractic benefit. However, most did not consider control of this benefit a high priority or an 

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- - - -

area of major concern. In fact, over 50 percent of Medicare and 60 percent of Medicaid 

respondents considered the chiropractic benefit to be a small part of their overall programs. Both 

Medicare contractors and State Medicaid agencies commented that more could be done to control 

utilization of the chiropractic benefit, but that resources are currently better spent controlling 

other more costly benefits. Also, private insurers were not concerned with controlling utilization, 

but it was because of their strict utilization caps rather than the size of the benefit. 

SCOPE AND METHODOLOGY 

We surveyed Medicare contractors, Medicaid agencies, and private insurers. More specifically, 

we surveyed: 

! all Medicare fee-for-service Part B contractors, 

! the 10 largest, by number of enrollees, Medicare managed care organizations from 10 

different States, 

! all 50 State Medicaid agencies, and the District of Columbia (each were sent a two-part 

survey - one for their fee-for-service contractors and one for their largest, by number of 

enrollees, managed care organizations), and 

! twenty private insurers (10 judgmentally selected Federal employee health benefit plans, 

and benefit managers for the 10 largest, by number of employees, private sector 

companies). 

In instances where respondents did not answer every survey question, our percentages are based 

on the number who responded. 

In addition to the surveys, we did on-site evaluations of one Medicare fee-for-service contractor, 

one Medicare managed care organization, two Medicaid fee-for-service contractors, and three 

Medicaid managed care organizations. Moreover, we interviewed officials with the Indiana 

Chiropractic Association, the American Chiropractic Association, and the Carrier Medical 

Director Chiropractic Clinical Workgroup. 

Finally, we used a 1 percent sample of HCFA’s 1996 National Claims History data to determine if 

Medicare contractors paid claims in accordance with HCFA policies, and to quantify the extent of 

chiropractic utilization. Appendix A further details our scope and methodology. 

We conducted our inspection between October 1997 and December 1997. We conducted this 

inspection in accordance with Quality Standards for Inspections issued by the President’s Council 

on Integrity and Efficiency. 

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FINDINGS

We found that Medicare, Medicaid, and private insurers use a variety of techniques to control 

utilization of chiropractic benefits. Allowable chiropractic benefits vary in both quantity and type 

of treatments. Along with varying benefits come varying controls. Typical controls include 

utilization caps, X-rays, physician referrals, co-payments, and post and prepayment reviews. 

Utilization caps are the most widely used, but these and other controls did not detect or prevent 

unauthorized Medicare maintenance treatments. 

UTILIZATION CAPS ARE THE MOST WIDELY USED CONTROL MECHANISMS 

Limiting the number of visits by establishing utilization caps was the most widely used control 

mechanism reported by all groups surveyed. A companion report on chiropractic benefits for 

Medicaid beneficiaries discusses benefits, treatment limits, and exceptions in detail (Chiropractic 

Care: Medicaid Coverage, OEI-06-97-00480). 

Utilization caps are most commonly broken down into two separate types - soft caps and hard 

caps. 

Soft caps are established service limits that can be exceeded with appropriate justification. For 

example, one such justification would be documentation that a beneficiary has aggravated an 

existing condition. 

Hard caps, as the name implies, are concrete service limits or dollar amounts that cannot be 

exceeded for any reason within a specified time frame. 

Table 1 shows the average soft and hard utilization caps for respondents included in our survey. 

TABLE 1 

AVERAGE SOFT AND HARD UTILIZATION CAPS 

MEDICARE MEDICAID PRIVATE 

SOFT CAPS 21 28 N/A 

HARD CAPS N/A 104 27 

Ninety-five Percent of Medicare and 46 Percent of Medicaid Programs Use Soft Caps 

Ninety-five percent (52 of 55) of all Medicare survey respondents said they use soft caps. The 

soft caps ranged from 11 to 52 treatments per year, with 12 treatments being the most common. 

On average, the Medicare respondents used a soft cap of 21 treatments. Table 2 shows 

chiropractic soft caps used by the Medicare respondents included in our survey. 

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TABLE 2 

MEDICARE CHIROPRACTIC SOFT CAPS 

TREATMENTS PER YEAR 

# Treatments 11 12 18 22 24 28 29 30 40 46 48 51 52 

Respondents 1 29 3 1 4 3 1 1 2 1 2 1 3 

HCFA requires all Medicare contractors to establish soft caps. Each contractor, however, 

determines the level of the cap (i.e. the number of treatments). HCFA further requires all 

Medicare contractors to evaluate the effectiveness of their caps on a quarterly basis. Based on 

these evaluations, HCFA granted 5 percent (3 of 55) of its contractors permission to deactivate 

their chiropractic caps. The three contractors documented that their soft caps were not cost 

effective. Instead, they now focus on post payment reviews to identify aberrant providers. 

Forty-six percent (12 of 26) of States that provide chiropractic benefits reported using soft caps. 

The soft caps ranged from 1 to 80 treatments per year, with the average being 28 treatments. 

Table 3 shows chiropractic soft cap limits used by State Medicaid Agencies. 

TABLE 3 

MEDICAID CHIROPRACTIC SOFT CAPS 

TREATMENTS PER YEAR 

# Treatments 1 6 10 12 18 20 24 30 48 60 80 

Respondents 1 1 1 1 1 1 2 1 1 1 1 

Fifty Percent of Medicaid Programs and 94 Percent of Private Insurers Use Hard Caps 

Half (13 of 26) of the States that provide chiropractic benefits reported using hard caps to control 

their Medicaid chiropractic benefits. The hard caps ranged from 12 to 365 treatments per year. 

The average hard cap is 104 treatments, however, this includes three States that allow one 

treatment per day. Excluding these three States, the average Medicaid hard cap is 29 treatments. 

Table 4 shows the chiropractic hard caps used by State Medicaid agencies. 

TABLE 4 

MEDICAID CHIROPRACTIC HARD CAPS 

TREATMENTS PER YEAR 

# Treatments 12 18 20 24 25 50 56 365 

Respondents 2 1 1 3 1 1 1 3 

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Ninety-four percent (16 of 17) of private insurers relied on hard caps to control benefit utilization. 

The 16 private insurers used 11 utilization caps and 5 financial caps. The utilization caps ranged 

from 12 to 60 treatments per year, with the average being 27 treatments. Table 5 shows the 

chiropractic utilization hard caps used by private insurers. 

TABLE 5 

PRIVATE CHIROPRACTIC UTILIZATION HARD CAPS 

TREATMENTS PER YEAR 

# Treatments 12 20 24 25 26 30 40 60 

Respondents 2 2 1 1 1 2 1 1 

The financial caps, used by private insurers, ranged from $225 to $2,000 per year, with the 

average being $1,035. Table 6 shows the chiropractic financial hard caps used by private insurers. 

TABLE 6 

PRIVATE CHIROPRACTIC FINANCIAL HARD CAPS 

TREATMENTS PER YEAR 

$ Cap $225 $250 $700 $2000 

Respondents 1 1 1 2 

Federal Costs for Medicaid Chiropractic Benefits Can Exceed That for Medicare 

Twenty-six States offer Medicaid chiropractic benefits. However, we limited our comparative 

analysis of Medicaid and Medicare Federal costs for chiropractic benefits to 24 States. We did so 

because one State did not have a Medicaid utilization cap and the Medicare contractor in another 

State did not have a utilization cap. 

The Federal reimbursement rates and cost per treatment rates for Medicaid chiropractic 

treatments are typically lower than they are for Medicare. Medicaid Federal matching 

reimbursement rates for the 24 States ranges from 50 percent to over 73 percent with 60 percent 

being the average. This is lower than Medicare, where Federal costs are 80 percent of allowed 

charges. Likewise, the average Federal cost for Medicaid manual manipulations of the spine is 

only $8.92, but for Medicare the average Federal cost is $18.92. 

However, overall Medicaid Federal costs for chiropractic services can exceed the cost for such 

services paid for by Medicare. This is because Medicaid’s utilization caps are significantly higher 

than Medicare’s. Sixty-seven percent (16 of 24) of States offering chiropractic care through their 

Medicaid fee-for-service programs have higher utilization caps than Medicare. In one State, for 

example, the Medicare utilization cap is 12 treatments per year while the Medicaid utilization cap 

is 50 treatments. 

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Medicaid’s average utilization cap for the 24 States is 71 treatments per year, whereas Medicare’s 

average utilization cap is only 19 treatments per year. Federal costs, at the maximum utilization 

cap for Medicaid chiropractic benefits, average $554 per person, whereas in Medicare it is only 

$365 per person. 

X-RAYS PROVIDE LITTLE CONTROL OF CHIROPRACTIC BENEFITS 

Few Medicaid Agencies and Private Insurers Require X-rays to Document Treatment 

Necessity 

Thirty-one percent (8 of 26) of Medicaid programs require X-rays. However, 58 percent (15 of 

26) of Medicaid programs will reimburse chiropractors for X-rays. 

Only 12 percent (2 of 17) of private insurers require X-rays to ensure appropriateness of 

chiropractic claims. 

Elimination of the X-ray Requirement Should Have Little Impact on Chiropractic Controls 

since Most Medicare Contractors Do Not Use X-rays as a Control Mechanism 

Seventy-eight percent (43 of 55) of Medicare respondents claimed X-rays were not essential for 

ensuring the appropriateness of chiropractic claims. They said chiropractic benefit control would 

not be affected by the Balanced Budget Act of 1997, which eliminates the X-ray requirement by 

the year 2000. Several respondents commented that they do not use X-rays, but rather they 

compare diagnosis with treatment plans to determine appropriateness of treatments. 

The remaining 22 percent (12 of 55) said elimination of the X-ray requirement would impact their 

ability to verify spinal subluxations. 

PHYSICIAN REFERRAL IS COMMONLY USED AS A CONTROL MECHANISM FOR 

MANAGED CARE, BUT NOT FOR FEE-FOR-SERVICE PLANS 

Physician Referral Is Common for Managed Care Plans 

In 68 percent (15 of 22) of Medicaid managed care organizations and 66 percent (4 of 6) of 

private managed care organizations, physician referrals are required to obtain chiropractic care. 

According to the American Chiropractic Association, this common managed care gatekeeper 

practice restricts access to chiropractic care. 

Private insurers typically use physician referrals in conjunction with hard caps to control 

chiropractic utilization. Only one private insurer used physician referrals as its only control 

mechanism. 

Few Fee-For-Service Programs Require Physician Referral 

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Overwhelmingly, Medicare, Medicaid, and private insurers allow direct access to chiropractors 

without a physician referral. No Medicare fee-for-service program required physician referral for 

access to chiropractors. 

Only 8 percent (2 of 26) of Medicaid fee-for-service programs require physician referrals to 

access chiropractic services. The two Medicaid programs that do require physician referrals, 

however, said physician referral is a very effective control mechanism. It allows primary care 

physicians to monitor and coordinate clients’ health care needs. 

About 9 percent (1 of 11) of private fee-for-service insurers require physician referrals to access 

chiropractic services. 

CO-PAYMENTS, COINSURANCE, AND DEDUCTIBLES ARE USED TO HELP 

CONTROL CHIROPRACTIC BENEFITS BY MEDICARE AND PRIVATE INSURERS, 

BUT NOT BY MEDICAID 

Medicare and private insurers require co-payments, coinsurance, or deductibles. Medicaid 

programs, however, typically do not require co-payments, coinsurance, or deductibles. 

A co-payment is a set amount beneficiaries must pay when they visit a physician. The private 

insurers in our survey had co-payments ranging from $5.00 to $15.00 per chiropractic treatment. 

These co-payments are common in both managed care and fee-for-service plans. 

Coinsurance is the percentage of medical expenses for which a patient is responsible. For 

Medicare Part B services, coinsurance equals 20 percent of approved charges. 

A deductible is the amount a beneficiary must pay before a health plan begins payment for 

covered services. Medicare has a $100 annual deductible for Part B services, including 

chiropractic treatments. Private insurers’ yearly deductibles ranged from $200 to $500 per year. 

These deductibles applied to all physician services, including chiropractic care. 

Medicaid fee-for-service programs required co-payments in only three States. These co-payments 

ranged from 50 cents to $2.00 per chiropractic visit. Likewise, only one Medicaid managed care 

organization responded that a co-payment was required -- $1.00 per visit. 

Such patient cost sharing may be important when considering how best to control chiropractic 

utilization. A study by the Agency for Health Care Policy and Research suggests that the actual 

out-of-pocket expense a patient incurs greatly affects their use of chiropractic services.2 To 

illustrate, the study shows that when patients have to share 25 percent or more of the cost, they 

decrease their chiropractic usage by half. 

PREPAYMENT REVIEWS DO NOT CONTROL CHIROPRACTIC BENEFITS 

2

 Agency for Health Care Policy and Research, Pub No. HS06920, 1996, The Affect of Cost Sharing on 

the Use of Chiropractic Services 

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Medicare and Medicaid Contractors Typically Do Prepayment Reviews, However, it Is 

Basically a Forms Verification Process 

All Medicare and Medicaid contractors conduct prepayment reviews. However, the reviews are

merely computerized edits or manual reviews to ensure that claim forms are properly completed. 

The level of prepayment review for Medicare and Medicaid is similar and usually includes the

following edits:

! appropriate procedure codes,

! appropriate diagnosis codes,

! date of X-ray,

! date of first treatment falling within a specified time period of the X-ray date,

! appropriate physician identification number, and 

! no more than one treatment per day.

Medicare and Medicaid Prepayment Reviews for Medical Necessity Are Paper Audits 

Medicare and Medicaid policies require that all services be medically necessary. However, 

Medicare and Medicaid contractors generally do not verify the medical necessity of chiropractic 

treatments. 

Medicare and Medicaid contractors, for example, typically review claims for medical necessity 

only if they exceed their soft caps. One Medicare contractor’s policy states “services exceeding 

more than what Medicare allows, in a given time frame, are subject to review for medical 

necessity.” Another commented that “we review every claim for medical necessity that exceeds 

the cap.” A Medicaid agency said “medical necessity must be documented in order to receive 

additional treatments (beyond the utilization cap).” 

Medical necessity reviews in excess of the caps, however, are paper audits. Contractors typically 

determine medical necessity by verifying that a claim form was completed properly. They verify 

that the diagnosis codes are from the approved list. In addition, they verify that comments, such 

as “aggravated existing condition,” are on the claim form. In effect, such reviews are “check the 

appropriate box” edits, and not verification that services are truly medically necessary. Patient 

records and other documentation of medical necessity are typically not reviewed. 

POST PAYMENT REVIEWS ARE USED BY MEDICAID, BUT NOT BY MEDICARE, 

TO HELP CONTROL CHIROPRACTIC BENEFITS 

Medicaid Contractors Use Post Payment Reviews to Help Control Chiropractic Utilization 

Sixty-five percent (17 of 26) of State Medicaid fee-for-service agencies monitor and control 

chiropractic claims using post payment reviews. The reviews are typically limited to quarterly 

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Surveillance and Utilization Review Surveys. Such reviews identify aberrant providers. Three 

States said they do not do more extensive individual reviews due to the small nature of the 

chiropractic program and the limited number of problem claims found in the past. 

Medicare Contractors Rarely Conduct Post Payment Reviews of Chiropractic Claims 

HCFA policy requires Medicare contractors to conduct focused medical reviews and 

comprehensive medical reviews. A focused review is a treatment specific audit, whereas a 

comprehensive review is a provider specific audit. It is up to the contractors to determine which 

benefits to review. All Medicare respondents conduct these reviews, however, most had focused 

little to no activity on chiropractic benefits since 1994. 

Eighteen percent (10 of 55) of Medicare respondents claimed to conduct focused reviews of 

chiropractic benefits. Since 1994, three of the 10 respondents claimed to have saved about 

$759,000 as a result of focused reviews. However, of the respondents, one accounted for over 99 

percent of those savings. The remaining seven respondents conducted, on average, less than two 

focused reviews per year. 

Thirty-six percent (20 of 55) of Medicare respondents claimed to conduct comprehensive reviews 

of chiropractic benefits. Ten respondents claimed their comprehensive reviews resulted in 

financial savings totaling about $330,500. However, one of the respondents accounted for about 

71 percent of those savings. The remaining respondents conducted varying numbers of reviews 

resulting in such things as educational efforts and a couple of fraud referrals. 

UNAUTHORIZED CHIROPRACTIC MAINTENANCE TREATMENTS ARE NOT 

DETECTED AND PREVENTED 

According to HCFA policy,3 chiropractic maintenance treatments are not authorized for payment. 

However, our analysis of a 1 percent sample of HCFA’s National Claims History database 

showed that in 1996, Medicare likely paid for 28,889 chiropractic maintenance treatments. These 

inappropriate maintenance treatments cost Medicare $688,821. This projects to over $68 million 

for the Medicare program in 1996. Projected over five years, Medicare reimbursements for 

unauthorized chiropractic maintenance treatments is about $447 million. 

Chiropractic Coverage Policies 

HCFA’s Medicare Carrier Manual identifies treatment of acute and chronic subluxations as 

Medicare reimbursable conditions. Maintenance treatments, however, are not a covered service. 

HCFA and local carrier policies, and Agency for Health Care Policy and Research guidelines, 

show that chiropractic treatment for acute conditions should consist of intense treatments early on 

with additional treatments tapering off quickly. To illustrate, the HCFA approved Medicare Part 

3

 HCFA Medicare Carrier Manual, section 2251.1 

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10 
B Model Local Medical Review Policy for Chiropractic Service calls for “vigorous therapy” the 

first month, “less vigorous therapy” the second month, and finally, “minimum therapy” of up to 

four treatments the third month. 

However, HCFA and local carrier policies allow chiropractic treatment for chronic conditions. 

Such conditions require less frequent treatments than acute conditions. A patient’s condition is 

considered chronic if it has existed for an extended period of time. A chronic condition is not 

expected to be completely resolved, but continued chiropractic therapy is expected to result in 

some functional improvement. Hence, chiropractic treatments may need to extend over long 

periods. 

On the surface, it seems difficult to distinguish between unauthorized chiropractic maintenance 

treatments and authorized treatments for chronic conditions. The treatment patterns are similar. 

Unauthorized chiropractic maintenance treatments are generally indicated by consecutive months 

of minimal therapy of four treatments or less. Likewise, authorized chiropractic treatments for 

chronic conditions are generally indicated by four or fewer treatments per month for an extended 

time period. 

It is possible, however, to distinguish between the two. To illustrate, a utilization frequency 

analysis of chiropractic treatments will enable carrier staff to identify potential unauthorized 

maintenance treatments. However, some of these treatments could be for authorized chronic 

conditions. Therefore, carrier staff must also review individual claims documentation to identify 

treatments for chronic conditions. Beneficiary symptoms and chiropractor diagnosis are two 

pieces of claims information that allow carrier staff to distinguish between treatments for chronic 

conditions and maintenance. 

Estimated Medicare Reimbursement for Maintenance Treatments 

To estimate potential unauthorized Medicare reimbursements for chiropractic maintenance 

treatments, we conducted a utilization frequency analysis of chiropractic treatments in 1996. 

Thereafter, we adjusted our findings to exclude possible treatments for chronic conditions. In 

making the adjustment, we did not review individual claims, but rather we used an estimate on the 

extent of chronic conditions nationwide. 

We based our utilization frequency analysis on a 1 percent sample of HCFA’s 1996 National 

Claims History file. We used the local model policy criteria of minimum therapy of four 

treatments or less in the third and final month of treatment. We then identified beneficiaries with 

treatment utilization of two or more consecutive months of minimum therapy. This analysis 

identified beneficiaries who received either maintenance or chronic chiropractic treatments (see 

appendix A for additional information on our methodology). 

HCFA data files did not distinguish between treatments for acute or chronic conditions. 

Therefore, we adjusted our findings by deleting chiropractic treatments for possible chronic 

conditions. To do so, we used information provided by the American Chiropractic Association. 

That research showed that 10 percent of chiropractic conditions are chronic. After eliminating 

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11 
beneficiaries with chronic conditions from our analysis, we concluded that 7,594 Medicare 

beneficiaries received 28,889 probable unauthorized maintenance treatments at a cost of 

$688,821. Table 7 summarizes maintenance treatments in 1996. 

TABLE 7 

NUMBER OF MEDICARE BENEFICIARIES RECEIVING UP 

TO FOUR CHIROPRACTIC TREATMENTS DURING TWO OR 

MORE CONSECUTIVE MONTHS IN 1996 

# Beneficiaries # 

Consecutive 

Months 

Probable 

Maintenance 

Treatments 

Allowed 

Amounts 

3,298 2 5,259 $125,058 

1,486 3 4,370 $104,321 

855 4 3,545 $84,788 

563 5 3,090 $74,388 

348 6 2,256 $53,751 

247 7 1,881 $45,103 

187 8 1,585 $37,462 

128 9 1,204 $28,298 

138 10 1,504 $36,012 

88 11 962 $23,356 

256 12 3,233 $76,284 

7,594 28,889 $688,821 

Our findings in Table 7 are based on a 1 percent sample, therefore, we projected them to the 

Medicare population. We concluded that 759,400 Medicare beneficiaries received 2,888,900 

probable chiropractic maintenance treatments at a cost to the Medicare program of $68,882,100. 

Assuming chiropractic reimbursements continue to increase by 6.87 percent per year, Medicare 

reimbursements for unauthorized chiropractic maintenance treatments, over a five year window 

(1998-2002), would be about $447 million. 

At the request of HCFA officials, we included the above information, broken out by State, in 

appendix B. 

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12 
RECOMMENDATIONS

This report describes controls used by Medicare, Medicaid, and other payers for chiropractic 

benefits. Utilization caps were the most widely used control mechanism. Needless to say, their 

intent is to limit the quantity of services. However, neither the utilization caps, nor any of the 

other controls, detected and prevented reimbursements for unauthorized Medicare chiropractic 

maintenance treatments. 

Accordingly, we recommend that HCFA develop system edits to detect and prevent unauthorized 

payments for chiropractic maintenance treatments. HCFA can do so by: 

! requiring chiropractic physicians to use modifiers to distinguish the categories of the spinal 

joint problems (i.e. acute, exacerbation, recurrence, and chronic), and 

! requiring all Medicare contractors to implement system utilization frequency edits to 

identify beneficiaries receiving consecutive months of minimal therapy. 

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13 
COMMENTS

The HCFA Administrator, the Assistant Secretary for Planning and Evaluation (ASPE), and the 

Assistant Secretary for Management and Budget (ASMB) commented on our report. The full 

text of their comments are in appendix C. 

The HCFA concurred with our recommendations. The Balanced Budget Act of 1997 required 

HCFA to develop utilization guidelines for chiropractic care. In developing such guidelines, 

HCFA will develop modifiers to distinguish categories of spinal joint problems, and utilization 

frequency edits as we recommended. 

ASPE agreed that edits to identify inappropriate billings seemed desirable. However, ASPE 

commented that our use of “averages,” on pages four through six, to summarize the range of 

utilization caps was inappropriate because they did not reflect “real practice.” Our report 

provides the reader both the average utilization caps and the actual utilization caps for all 

Medicare and Medicaid respondents. 

Further, ASPE suggested that more information is needed to substantiate two State Medicaid 

Administrators’ claims that physician referrals are effective controls for chiropractic services. 

Specifically, ASPE wanted to know how these States measured effectiveness. Additionally, 

ASPE noted that it would be helpful to know how the use of chiropractic services are distributed 

between managed care and fee-for-service providers. These questions were not part of the scope 

of this study. However, we plan to continue our analysis of chiropractic services and utilization in 

the future. These and other questions are likely topics for inclusion in future analysis. 

ASMB expressed serious concerns about the methodology we used to estimate payments for 

probable inappropriate chiropractic maintenance treatments. Specifically, ASMB was concerned 

about our use of a 10 percent estimate to represent the Medicare population who received 

chiropractic care for chronic conditions. The 10 percent estimate, furnished by the American 

Chiropractic Association, is a universal percentage estimate of the population at large. 

Demographic data and specific analysis is not available to differentiate between the Medicare 

population and the population at large. However, we contacted several Medicare Carrier Medical 

Directors who stated, based on their reviews of Medicare chiropractic claims, that the 10 percent 

appeared to be a reasonable estimate for the Medicare population. Additionally, HCFA’s 

implementation of our recommendations will produce demographic data needed to more precisely 

differentiate chiropractic chronic care use by Medicare beneficiaries. 

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14 
APPENDIX A

SCOPE AND METHODOLOGY 

Medicare 

We had 55 responses to the Medicare fee-for-service survey. We received responses for all 50 

States. The additional five responses are detailed in Table 1. 

TABLE 1 

MEDICARE RESPONSES 

# of responses 

50 States 50 

California - serviced by 2 contractors 1 

Missouri - serviced by 2 contractors 1 

New York - serviced by 3 contractors 2 

District of Columbia 1 

Total 55 

Medicaid 

Our sample population consisted of 26 State fee-for-service programs that offered a chiropractic 

benefit to the majority of their Medicaid population. Although 30 State fee-for-service programs 

reported offering some type of chiropractic service to Medicaid beneficiaries, four States only 

offered a very limited benefit to children as part of their Early and Periodic Screening, Diagnostic 

and Treatment program. Due to the limited scope of those four programs, we excluded them 

from our sample. 

Although we surveyed both State Medicaid fee-for-service and managed care programs, for the 

purposes of this study we limited our primary Medicaid focus to those 26 State programs offering 

a chiropractic benefit through the traditional fee-for-service environment. Observations made 

regarding State Medicaid managed care programs will be noted by specifically referring to that 

group. 

Utilization Caps 

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A - 1 
Seven Medicare utilization caps and nine State Medicaid utilization caps are based on time 

periods other than one year. For such States, we annualized their utilization caps accordingly. 

For example, one State reported a utilization cap of 76 treatments in 540 days. Annualized, the 

cap is 51 treatments. 

Probable Maintenance Treatments 

To identify probable maintenance treatments we took several steps. First, we used a 1 percent 

sample of HCFA’s 1996 National Claims History file and identified 13,974 Medicare beneficiaries 

who received 122,047 chiropractic treatments at a cost of $2,937,668. Next we did a utilization 

frequency analysis of this data and identified 8,990 beneficiaries with two or more consecutive 

months of minimal therapy (1-4 treatments). These beneficiaries received 41,094 chiropractic 

treatments at a cost of $982,588. We considered this subpopulation to be receiving unauthorized 

maintenance treatments or treatments for chronic conditions. 

In order to account for the chronic conditions, we used information provided by the American 

Chiropractic Association that showed that 10 percent of chiropractic conditions are chronic. To 

be conservative, we assumed that the full 10 percent of chronic conditions were included in our 

sample. Therefore, we took 10 percent of the 1 percent figures and subtracted them from our 

subpopulation figures. For example, we took 10 percent of the $2,937,668 and subtracted it from 

our subpopulation treatment costs of $982,588. This resulted in probable unauthorized 

maintenance charges, adjusted for chronic conditions, of $688,821. 

We used the same process to reduce the number of beneficiaries to 7,594 and the number of 

chiropractic treatments to 28,889. Since these numbers are based on a 1 percent sample, we 

project them to the Medicare population to conclude that 759,400 Medicare beneficiaries received 

2,888,900 probable chiropractic maintenance treatments at a cost to the Medicare program of 

$68,882,100. 

Using Part B Extract and Summary System data for 1994 through 1997, we calculated the growth 

in Medicare chiropractic payments. This growth averaged 6.87 percent per year. We then used 

this growth rate to predict reimbursements for maintenance treatments for 1998 through 2002. 

Accepting that the $68.8 million in maintenance costs for 1996 would continue to go unchecked, 

and applying the 6.87 percent average growth, Medicare reimbursements for chiropractic 

maintenance treatments can cost in excess of $447 million from 1998 through 2002. 

Private Insurers 

Of the 20 private insurers surveyed, 10 were judgmentally selected Federal employee health 

benefit plans, and the other 10 were benefit managers for the largest, by number of employees, 

private sector companies. 

All 10 Federal employee plans responded, two of which had both a “high” and a “standard” 

option. Therefore, we have 12 Federal employee plan responses. 

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A - 2 
Seven of the 10 private sector companies responded, two of which offered both fee-for-service 

and managed care plans. Therefore, we have 9 private sector company responses. 

Combined, we received 21 private insurer responses to our chiropractic survey. However, four 

private insurers did not offer chiropractic benefits. Therefore, we based our analysis on the 17 

private insurers that offered chiropractic benefits. 

We included private insurers in our inspection for comparison purposes. We do not attempt to 

generalize to the private insurance population. 

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A - 3 
APPENDIX B

PROBABLE MAINTENANCE CHARGES 

STATE 

TOTAL 

CHIROPRACTIC 

TREATMENTS 

TOTAL 

ALLOWED 

CHARGES 

MAINTENANCE 

TREATMENTS 

ALLOWED 

MAINTENANCE 

CHARGES 

MAINTENANCE 

CHARGES AS % OF 

ALLOWED CHARGES 

NH 413 $9,902 147 $3,577 36.1% 

DC 59 $1,586 20 $540 34.0% 

IA 5,802 $130,193 1,975 $44,109 33.9% 

VT 333 $7,889 111 $2,583 32.7% 

SD 784 $17,343 231 $5,085 29.3% 

MI 6,994 $175,359 2,019 $50,296 28.7% 

MO 2,671 $58,477 756 $16,440 28.1% 

GA 2,654 $63,211 745 $17,662 27.9% 

DE 312 $7,863 85 $2,129 27.1% 

MA 2,059 $53,678 545 $14,147 26.4% 

OH 4,685 $111,027 1,232 $28,650 25.8% 

ND 858 $19,600 221 $5,037 25.7% 

AZ 2,415 $60,058 618 $15,285 25.5% 

PA 7,340 $178,658 1,869 $45,255 25.3% 

IL 6,739 $156,487 1,719 $39,517 25.3% 

ME 1,035 $25,737 259 $6,471 25.1% 

NM 349 $8,036 86 $1,990 24.8% 

UT 512 $12,093 127 $2,973 24.6% 

VA 1,878 $44,046 456 $10,449 23.7% 

KY 1,213 $25,875 292 $6,065 23.4% 

OR 1,598 $37,751 377 $8,834 23.4% 

IN 2,277 $50,692 535 $11,758 23.2% 

WA 3,635 $90,893 841 $21,081 23.2% 

CA 8,133 $208,445 245 $47,839 23.0% 

CO 1,059 $25,343 1,881 $5,818 23.0% 

CT 1,237 $33,982 281 $7,762 22.8% 

WY 223 $5,114 51 $1,160 22.7% 

NY 7,988 $210,107 1,833 $47,299 22.5% 

MN 2,916 $68,753 1,123 $15,008 21.8% 

NJ 5,092 $137,541 645 $30,038 21.8% 

TN 2,623 $59,188 1,045 $12,702 21.5% 

WI 4,719 $107,771 567 $23,200 21.5% 

MT 507 $11,360 107 $2,409 21.2% 

WV 464 $10,443 100 $2,189 21.0% 

KS 2,911 $67,623 608 $13,849 20.5% 

AK 188 $5,179 37 $1,046 20.2% 

NC 2,253 $50,867 457 $10,119 19.9% 

TX 7,445 $172,613 1,481 $34,071 19.7% 

AL 1,157 $25,410 231 $4,985 19.6% 

NE 1,988 $44,682 390 $8,720 19.5% 

FL 6,701 $166,095 1,294 $31,948 19.2% 

MD 860 $20,989 162 $3,947 18.8% 

ID 704 $15,722 127 $2,786 17.7% 

SC 800 $17,540 145 $3,102 17.7% 

AR 1,701 $38,920 287 $6,594 16.9% 

NV 650 $16,521 106 $2,695 16.3% 

RI 192 $4,972 30 $773 15.5% 

PR 79 $1,632 12 $252 15.4% 

LA 1,069 $23,820 163 $3,572 15.0% 

HI 155 $4,169 22 $604 14.5% 

MS 546 $11,758 67 $1,471 12.5% 

OK 1,058 $24,267 130 $2,924 12.0% 

Unknown 14 $388 0 $0 0.0% 

TOTALS 122,047 $2,937,668 28,889 $688,821 23.4% 

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B - 1
APPENDIX C

COMMENTS ON THE DRAFT REPORT 

We present, in full, comments from the HCFA Administrator, the Assistant Secretary for Planning 

and Evaluation (ASPE), and the Assistant Secretary for Management and Budget (ASMB). 

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C - 1 
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C - 2
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C - 3
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C - 4
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C - 5
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C - 6
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C - 7