Bush Administration To Announce New Policy on Excessive Medicare Payments

The Bush administration is expected to issue a final rule soon on a proposal designed to prevent health care providers from submitting Medicare and Medicaid claims that are "substantially in excess" of what they typically charge private payers for items or services, the New York Times reports. Violation of the policy could result in the exclusion of hospitals, drugstores and other providers from any federal health care program if their government prices are more than 20% higher than their "usual charges," which would be calculated as either the average or median amount charged to private patients and insurers for items or services during the past year, according to the Times. The rule would apply to prescription drugs administered by physicians, pharmacy services, ambulance services, medical equipment and supplies, laboratory tests and diagnostic imaging, but it would not apply to physician services provided under the Medicare fee schedule. Providers that offer charity care to the uninsured would be allowed to exclude such cases when calculating their usual charges. The administration said the new policy is necessary as "the Medicare program pays considerably more for some items and services than other payers" because some providers are "simply overcharging" the program. Lewis Morris, chief counsel to the HHS inspector general, said the policy would not require providers to offer the federal government their "best price," but it would address "the narrow situation in which providers are charging Medicare or Medicaid substantially more than they regularly charge a majority of their customers."

Health care providers maintain that medical payments are "so complex and convoluted" that calculating usual charges and making "meaningful comparisons" between Medicare and other insurers would be "impossible," the Times reports. Richard Pollack, executive vice president of the American Hospital Association, said, "Compliance with the proposed rule would be unworkable, extremely burdensome and exceedingly expensive" because "[m]ost hospitals have 10,000 or more items or services" on their fee schedules and have ever-changing contracts with 25 to 100 or more insurers. Pollack estimated compliance with such a rule would cost $1 billion annually. Meanwhile, some insurers said the rule might encourage providers to increase their charges to private insurers rather than reducing charges to the government, which would increase insurance premiums (Pear, New York Times, 12/28/03).