April 28,2004

Grassley keeps pressure on for clean-up of fraud and waste in power wheelchair program

WASHINGTON — Sen. Chuck Grassley said today that the Medicare officials need toact quickly to stop the scams and end the waste that riddle its power wheelchair program.

"Fraudulent schemes have made big money off this program because the equipment’s expensive, the government pays more than anyone else, and the controls are lax," Grassley said. "The problems could be costing Medicare hundreds of millions of dollars every year. And, everydollar that's lost to fraud, waste and abuse is a dollar that doesn't go to beneficiaries who need theservices and equipment provided by Medicare."

Grassley made his comments during a Senate hearing he convened to draw attention tothe problem and review solutions. This hearing of the Finance Committee, where Grassley is chairman, featured two new audits completed by the Inspector General for the Department of Health and Human Services and testimony from the independent General Accounting Office. Spending by Medicare over the last four years for power wheelchairs has increased by nearly 450 percent, from $289 million in 1999 to $1.2 billion in 2003.

The lead witness at Grassley's hearing today was a woman who was involved in amassive California-based Medicare fraud ring. She described how the operation made as muchas $25 million over several years by billing Medicare for as many as 100 power wheelchairs amonth but delivering only a fraction of that number. At the same time, this operation passed onsiteinspections by Medicare officials of its phony storefronts.

In reports released at today's hearing, the Inspector General said that while the Medicare reimbursement rate for the most popular power wheelchair, a K-11 model, is $5,297, the same wheelchair can be purchased on-line for $3,863, from wholesalers for $2,363, and from distributors and manufacturers for $1,550. The Inspector General also said that most of the claims it reviewed for power wheelchairs did not meet Medicare's coverage criteria for the K-11 wheelchair. Specifically, it found that 31 percent of the claimants did not qualify for any equipment. Another 45 percent did not qualify for the K-11, though they might have qualifiedfor different equipment such as a walker. Just 13 percent of the claimants qualified for the K-11.

In its testimony today, the General Accounting Office said that the government agencythat administers the Medicare program was given warnings about problematic trends with powerwheelchair reimbursements, but took no action until last fall when it announced a crackdowneffort dubbed "Operation Wheeler Dealer." The General Accounting Office said this plan hasbeen a good start, albeit late, but it doesn't address the issue of aggressive marketing ofwheelchairs for Medicare beneficiaries. Its review also said that the Center for Medicare andMedicaid Services has inadequate standards for providers of durable medical equipment likewheelchairs and that site visits are too infrequent and predictable.

During today's hearing, Grassley urged the witnesses to offer suggestions about changesto the program that would inhibit fraud and minimize waste. "The idea behind this hearing is toexpose the problem, identify good solutions and keep the pressure on to see the necessarychanges made," Grassley said.

The text of Grassley's opening statement from today's hearing follows here.

Prepared Remarks of U.S. Sen. Chuck Grassley of Iowa 
Chairman, Senate Committee on Finance
Hearing: "Taking Taxpayers for a Ride: Fraud and Abuse in the Power Wheelchair Program"

This hearing will come to order. Let me begin by extending a special thanks to all thewitnesses for their participation in today’s important hearing. A special thank you to RebeccaLewandowski, our first witness.

The purpose of today’s hearing is to examine a number of the fraudulent schemes andcostly and abusive practices that are taking place in the sale of motorized wheelchairs toMedicare and Medicaid recipients. However, merely identifying problems is not enough. I wanttoday’s hearing to also address fixing those problems. Accordingly, I am asking each witnesstoday to offer solutions based on their own experiences.

Therefore, I want to ask Mr. Kuhn, who is here today representing the Centers forMedicare and Medicaid Services, to remain at the hearing and listen to each of the witness’stestimony and recommendations. I intend to follow up with Dr. McClellan at CMS to get hisaction plan, including any other needed actions.

I want to make it clear from the start that Medicare and Medicaid fulfill vitalresponsibilities for our seniors and many others. It is critical that the CMS meet the interests andneeds of all these individuals in an effective, efficient, economical, and competent manner At thesame time — it is imperative that the interests and expectations of the taxpayers be met, as well.Since the inception of the Medicare and Medicaid programs, the government hasreimbursed qualified beneficiaries and recipients for the medical equipment they need to functionin society. Overall, however, it’s fair to say that the system has experienced some seriousproblems with fraud and abuse over the years.

Now today, we are here once again, attempting to address yet another serious problemarea for CMS — fraud, waste and abuse involving its reimbursements for power wheelchairs.We have a power wheelchair–the K11 right here in the hearing room. The K11 is the main typeof chair purchased by Medicare and we will hear that term come up a lot today.

Because of the immense and cost of the Medicare and Medicaid programs, it seemsthat no fraud in these programs is ever small: rather, it tends to total in the hundreds of millionsof dollars — or even the billions — and that’s with a B.

Today, the General Accounting Office and the Office of Inspector General at theDepartment of Health and Human Services are here to report on many serious problems theyhave documented. In fact, the OIG is releasing two reports today.

One of these reports looked at those who are receiving the most commonly providedpower wheelchair, the K-11, For this report, the OIG examined a statistically-valid sample ofthose who had received a K-11, and found that almost one-third–you heard it right–one third- didnot meet the requirements for any type of wheelchair.

In fact, the OIG found that only 13% of those it surveyed actually met the coveragerequirement for a K-11. That, I submit, is not a very good batting average — in any league. The OIG also conservatively calculated that for just calendar year 2001 alone, the overpayments forK-11 power wheelchairs totaled an estimated $178 million, and this was when the expendituresfor power wheelchairs were less than half what they total today.

Another OIG report being released today, looks at the prices that Medicare pays for theK-11, versus the prices that others pay. The conclusion, despite Medicare’s huge and buyingpower, it actually pays more for the K-11s than do other buyers. Please take a brief look at thechart we have here. Do you see a problem here??

Imagine, if the Medicare reimbursement amount was set at the prices available toconsumers and suppliers, then Medicare and its beneficiaries could have saved over $224 millionin one year. And if Medicare based its reimbursement amount on the median price offered bywholesalers or the median price that suppliers negotiated with manufacturers and distributors, theprogram could have saved between $459 million and $586 million — just in 2002.

None of this makes a whole lot of sense to this senator, and I don’t think it will make awhole lot of sense to the taxpayers from Iowa or the other 49 states who have just finishedsending much of their hard-earned dollars to Washington.

Coupling the OIGs findings on price and eligibility, and unfortunate to say, there are alsolots of schemes out there that are ripping off Medicare when it comes to power wheelchairs. Letme turn you attention to a one minute DVD that we are going to play for you.

Now let me tell you what you were looking at. You were looking at a group of peoplewho were defrauding the Medicare program. The Office of the Inspector General as part of asting operation, set up a pole camera, called what was sham storefront DME supplier and toldthem that the Center for Medicare and Medicaid Services was going to conduct an on-site visit.Because it was a sham operation, they needed to bring in supplies likes desks, chairs and DMEsupplies to pass the on-site review. That’s what you just saw.

Today, we have one witness who has agreed to testify and to provide us with a realinsiders account of how power wheelchair fraud works. The DVD that you just saw is one of thesham DME’s in which she was involved. She has agreed to talk to us candidly about her personalexperience in a scam that bilked Medicare for about $25M.

Now, I would be remiss if I did not say that most suppliers and most manufacturers areputting in an honest days work and submitting accurate bills to the federal government forpayment. They are playing by the rules and we welcome their assistance in combating fraud.

The GAO, as well, has some startling findings to report today. Although CMS has notedthat there was a four-year growth rate of about 450% in expenditures for power wheelchairs, onlyrecently, has CMS finally gotten around to asking “Why?” and then begun to attempt to stop it. Ifind that very troubling — especially since GAO reports that CMS was advised about theproblem some 6 or 7 years ago. Fortunately, the Center for Medicare and Medicaid Servicesrecently initiated Operation Wheeler Dealer in an effort to attack the problem of wheelchairfraud; for that I am grateful; but rest assured we won’t be waiting another 6 or 7 years for theresults of that initiative.

GAO also has also examined CMS’s 10-point initiative unveiled last September toaddress power wheelchair fraud. I am anxious to hear what GAO has to say about that proposaland I am interested in CMS responses to the findings that will be presented by both the GAO andthe OIG.

Finally, we will have some thoughtful comments from some skilled professionals andrepresentatives of the disability community and the DME industry.