SACRAMENTO—California State Controller John Chiang has charged that the state’s Department of Health Care Services (DHCS) is wasting millions of dollars in its reimbursements to California Medical Assistance (Medi-Cal) hearing aid providers. Medi-Cal, the California Medicaid program, serves about 9 million low-income families, seniors, persons with disabilities, children in foster care, pregnant women, and certain low-income adults. That represents nearly a quarter of the entire population of the state.
According to a press release issued by Chiang’s office, the State Controller’s Office (SCO) reported in March 2011 that auditors had questioned more than $500,000 in reimbursements paid to a single Medi-Cal audiologist. Their review revealed a large difference between what the audiologist paid for hearing aids and the amount he was reimbursed by DHCS. In one case, the report said, the audiologist had purchased a pair of hearing aids for $120, but under the Medi-Cal reimbursement policy then in effect he was reimbursed $1465.
That report led SCO to have its auditors review 60 claims filed in 2009 by five other Medi-Cal audiologists and hearing aid dispensers. They found that because of manufacturers’ discounts and rebates, the actual acquisition costs for the providers were much lower than the wholesale costs they reported to DHCS, which were used to determine the reimbursement rate. For example, Chiang said, one provider paid $436 for a hearing aid and was reimbursed for a wholesale cost of $1218.
The review also found that the Department of Health Care Services had failed to comply with a 2007 statute requiring it to enter into contracts with vendors of hearing aids by June 30, 2008. Consequently, said Chiang, providers could purchase hearing aids from a variety of vendors without following any guidelines as to approved vendors and products. As a result, the controller said, it was difficult to determine the quality of vendors and the level of care provided to Medi-Cal clients.
CHANGES MADE AND PROPOSED
Following the auditors’ investigation, DHCS issued new instructions for calculating reimbursement rates. While the controller called them “a constructive first step,” he suggested three other changes that the department could choose among to achieve up to $27 million in additional savings.
- According to Chiang, using the current Medi-Cal methodology, but substituting the actual acquisition costs for the one-unit wholesale cost would save $25.5 million, or 41%.
- Using the durable medical equipment reimbursement methodology, which is the actual acquisition cost plus a 100% mark-up, would save $18.7 million, or 30%.
- Using the current reimbursement policy of the California Children’s Services, which is the actual acquisition cost plus a 60% mark-up, would save $27.4 million, or 44%.
The controller also called on DHCS to ensure that the state is obtaining the most favorable prices by implementing the 2007 statute requiring contracts with hearing aid vendors.
