State Paying Millions Too Much for Hearing Aids, Controller Finds

State Controller John Chiang reported February 27 that the Medi-Cal program could save $27.4 million over a three-year period by modifying its reimbursement practices for hearing aids purchased for low-income Californians.

A letter from the controller describes the situation:

"In March 2011, the SCO (State Controller's Office) issued a report on an audiologist that identified $507,871 in questioned costs because the provider was unable to provide documents to support the purchase of hearing aids. During that review, the SCO auditors found a significant difference between what the provider paid for hearing aids (acquisition cost) and the amount of reimbursement the provider received under Medi-Cal's reimbursement policies. For instance, in one case, the provider had purchased a pair of binaural hearing aids for $120 but, under Medi-Cal's reimbursement policy in effect at the time, the provider received $1,465. While this was the most extreme example, we noted 31 similar instances of reimbursement for this particular provider.

"To determine whether similar results were occurring in other providers, we undertook a … review of 60 claims for five additional providers. Based on the results of this review, we believe that the Medi-Cal program could save up to $27.4 million over a three-year period by adopting an alternate reimbursement methodology."

The controller said the Department of Health Care Services, which oversees the purchases, has taken steps to address the problems. (Source: State Controller's Office report, "Hearing Aid Reimbursement Policy," February 27.)

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