Probe: Medicare Paid Billions in Suspect Claims

The government paid more than $1 billion in questionable Medicare claims for medical supplies that showed little relation to a patient's condition, including blood glucose strips for sexual impotence and special diabetic shoes for leg amputees, congressional investigators say.

Billions more in taxpayer dollars may have been wasted over the last decade because the government-run health program for the elderly and disabled paid out claims with blank or invalid diagnosis codes, such as a "?" or "zzzzz." Medicare officials say even smiley-face icons could have been accepted.

The report by Republicans on the Senate Homeland Security investigations subcommittee, obtained by The Associated Press, is the latest to detail lax oversight in the $400 billion program that has been cited by government auditors as a high-risk for fraud and waste for nearly 20 years.

The panel's review of millions of claims submitted by sellers of wheelchairs, drugs and other medical supplies on behalf of Medicare patients from 2001 to 2006 found at least $1 billion in which the listed diagnosis code appeared to have little, if any, connection to the reimbursed medical item.

For example, blood glucose test strips are almost exclusively used for diabetics. But Medicare paid millions of dollars to medical suppliers for the test strips without question based on non-diabetic diagnoses ranging from typhoid and bubonic plague to chronic airway obstruction and "psychosexual dysfunction."

Other questionable claims included wheelchairs or whee

Based on a sample of 2,000 of those invalid coding claims, investigators found more than 30 percent could not be verified as legitimate and "bore characteristics of fraudulent activity," such as doctors who were actually dead, retired or who denied authorizing the treatment or making the diagnosis.

—The CMS contractor responsible for analyzing Medicare claims data maintained information that was incorrect and out of date. Investigators said that raised questions as to whether the contractor had effectively carried out its role of identifying potential waste and fraud; CMS has since changed contractors.

—Federal regulations require that CMS pay only for items that are deemed "medically necessary." Yet CMS does not examine diagnosis codes to determine whether the equipment is actually necessary before making payment; the agency instead relies on medical suppliers to maintain paperwork from doctors attesting to that fact. Such paperwork is not routinely submitted, and only 3 percent of claims are reviewed after payment is made.

Tyler J. Wilson, president of the American Association for Homecare, which represents manufacturers and sellers of medical equipment, agreed that Medicare should check claims forms more carefully. He attributed the Senate's findings to both "criminal behavior" as well as "a lack of familiarity" with the Medicare system among newer medical suppliers.

"We'll take our share of the responsibility that all providers have a duty to be precise when filling out any claims form," he said. "We're concerned about Medicare officials' failure to impose upfront controls to prevent people with no intention of following procedures from getting payment."

The report comes as advocacy groups such AARP have urged Congress and the next president to make changes to the rapidly growing domestic entitlement program to stem rising health care costs while preserving benefits for millions of the elderly and disabled.

Sen. John McCain, the Republican presidential nominee, has promised to balance the budget by the end of his first term if elected in part by curbing wasteful spending and overhauling costly entitlement programs. Sen. Barack Obama, the Democratic nominee, also has pledged generally to reexamine "programs that are wasting your money."

CMS has acknowledged that its medical equipment program is susceptible to fraud and waste, estimating in 2007 that $1 billion of the roughly $10 billion in Medicare payments over a one-year period were improper. A recent report by the HHS inspector general suggested that annual waste could actually be as high as $2.8 billion, citing particularly shoddy government oversight.