Objective

To determine the extent of implementation of the seven recommendations included in our initial audit report, Medicaid Program – Excessive Payments for Durable Medical Equipment Rentals (Report 2021-S-36).

About the Program

The Department of Health (DOH) administers the State’s Medicaid program. DOH uses two methods to pay for Medicaid services: fee-for-service (FFS) and managed care. Under the FFS method, DOH pays health care providers directly (through eMedNY, its claims processing and payment system) for services rendered to Medicaid recipients. Under the managed care method, DOH pays managed care organizations (MCOs) a monthly premium for each enrolled Medicaid recipient and, in turn, the MCOs arrange for the provision of health care services and reimburse providers for those services.

Medicaid recipients receive necessary durable medical equipment (DME) as a benefit of the program. DME includes devices and equipment that are available to recipients on a monthly rental basis. Under both FFS and managed care there are typically limits (or caps) on the number of monthly rental payments—many items have 10-month caps. In accordance with Medicaid regulations, when the monthly rental payment limit is reached but the item is still needed, it is generally considered purchased for the recipient at no additional cost (because the purchase price of the DME has generally been met). In contrast, oxygen equipment—a type of DME—is allowed as a continuous (i.e., uncapped) rental and is not purchasable under Medicaid. Therefore, Medicaid’s current reimbursement policy does not limit the number of rental payments made for oxygen equipment under both FFS and managed care. By comparison, under Medicare—a federal health insurance program for people age 65 and older and for those under age 65 with certain disabilities—oxygen equipment rentals are subject to a 36-month rental limit (i.e., capped rental).

The objective of our initial audit, issued on April 12, 2023, was to determine whether Medicaid MCOs inappropriately paid for DME beyond allowed rental limits, and whether the Medicaid program could achieve cost savings by implementation of a rental cap on oxygen equipment. The audit covered the period from July 2016 to December 2021 for non-oxygen-related DME rentals and September 2018 to December 2021 for oxygen-related DME rentals. We found about $1.5 million in overpayments and $503,619 in questionable payments. We also estimated potential cost avoidance for the Medicaid program of $8.6 million if DOH had adopted a similar policy to Medicare’s 36-month cap on oxygen equipment rental payments.

Key Findings

DOH officials made little progress in addressing the issues we identified in our initial audit report. For example, DOH had not formally determined whether it is efficient and appropriate to require a cap on the number of rental payments for oxygen equipment under managed care or FFS. Of the initial report’s seven audit recommendations, one was partially implemented and six were not implemented.

Key Recommendation

DOH officials are requested, but not required, to provide information about any actions planned to address the unresolved issues discussed in this follow-up within 30 days of the report’s issuance.