Industry News

OIG Releases Report on Pricing Disparities Between Federal Health Programs and Private Companies.

Jennifer Kirchner | August 2013

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a report spotlighting disparities in pricing between federal health programs and private companies.  Numerous OIG studies have found that Medicare and Medicaid repeatedly pay more than private insurers for the same medical procedure, service, or product.  The studies also revealed other disparities between federal programs and private companies including:

  • Medicare paid between 18 and 30 percent more for laboratory tests.
  • Medicare paid more than four times the average purchase price for negative pressure wound therapy pumps.
  • Medicare and its beneficiaries spent $37 million more than suppliers for a back orthotic device.

To rectify these disparities, the OIG recommended that the Centers for Medicare & Medicaid Services (CMS) seeks to lower Medicare payment rates for lab tests and adopt copayments and deductibles through legislation.  The OIG also recommended that CMS reduce the amount it pays for medical devices and include these devices in the Bidding Acquisition Program (Program).  The Program has been successful at reducing the cost of diabetes testing strips (DTS) for Medicare.  However, the OIG noted that pricing disparities for DTS still exist in Medicaid, with State Medicaid programs reimbursing providers for DTS at varying rates.  Some states use competitive bidding programs or collect rebates to reduce the cost of DTS.  The OIG reported that implementing a competitive bidding program or rebate system could reduce the cost of DTS to states by half.

The OIG article on the pricing disparity between federal health programs and private companies is available at:

Department of Health and Human Services Office of Inspector General.  “Spotlight On…Bad Bargains for Federal Health Programs.”  Spotlight Article.  2 Aug. 2013.

About the Author

Jennifer Kirchner is a licensed attorney in Illinois and Wisconsin. Ms. Kirchner has expertise in assessing provider compliance with the Anti-Kickback Statute, Stark Law, the False Claims Act, HIPAA Privacy and Security Rules and clinical research laws and regulations.