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TRICARE Payments for Standard Electric Breast Pumps and Replacement Parts

DODIG-2018-108

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Objective:

We determined whether the DoD paid reasonable prices for standard electric breast pumps and replacement parts provided to beneficiaries in the TRICARE North, South, and West Regions in 2016.

Background:

The Defense Health Agency (DHA), an agency under the control, authority, and direction of the Assistant Secretary of Defense (Health Affairs), manages the TRICARE program. TRICARE is the DoD’s managed health care program for active duty service members, retirees, and eligible family members both in the United States and overseas. In the United States, the TRICARE program is divided into the North, South, and West health service regions (referred to in our report as the three TRICARE regions). The DHA awarded contracts to three contractors to manage health care support and claims processing for the three TRICARE regions.

To determine whether the DHA overpaid for breast pumps, we compared the amounts the DHA paid to the fixed reimbursement rate. We used this reimbursement rate because the contractor in the TRICARE West region negotiated with three national suppliers to obtain fixed reimbursement rates for eight different breast pump models. Furthermore, the TRICARE North and South regions may have been able to obtain similar rates because two of these three national suppliers also provided breast pumps to beneficiaries in the TRICARE North and South regions in 2016.

In addition, to determine whether the DHA overpaid for replacement parts, we compared the amounts the DHA paid to reimbursement rates paid by Medicaid, which is funded jointly by states and the U.S. Government. We used the highest Medicaid rates across six states. According to DHA personnel, none of the three TRICARE regional contractors negotiated fixed reimbursement rates with suppliers for replacement parts.

Finding:

We concluded that the DHA overpaid for standard electric breast pumps and replacement parts for beneficiaries in the three TRICARE regions in 2016. Specifically, the DHA overpaid for:

  • 54,006 of 59,241 breast pumps (91.2 percent); and
  • 380,911 of 671,112 replacement parts (56.8 percent).

This occurred because the DHA did not require contractors for the three TRICARE regions to use only suppliers that had fixed reimbursement rates for breast pumps and replacement parts. As a result, we calculated that the DHA overpaid $16.2 million for standard electric breast pumps and replacement parts provided to TRICARE beneficiaries in all three TRICARE regions in 2016. If the DHA continues its current practice, and prices and volume stay the same, the DHA could overpay an additional $81.2 million over the next 5 years.

Recommendations:

We recommend that the DHA Director:

  • Use only suppliers that have entered into agreements that have fixed reimbursement rates to provide standard electric breast pumps and replacement parts throughout all TRICARE regions.
  • To the extent practicable, review and pursue appropriate action, such as recouping any overpayments from the suppliers that billed excessive amounts for breast pumps and replacement parts.

Management Comments and Our Response:

The DHA Director agreed with our finding, but only partially agreed with our recommendation to negotiate fixed rates for breast pumps and parts. The DHA Director stated that the implementation of a fixed rate for breast pumps and parts is a necessary step and the DHA is in the preliminary phases of establishing these maximum allowable rates. The DHA Director also stated that DHA contractors could then apply additional discounts for their network providers. The DHA Director stated that the DHA wants to allow beneficiaries to continue to have access to out‑of‑network providers and retail environments for the purchases of these items with reasonable cost controls. Therefore, the recommendation is resolved but remains open. We will close the recommendation once we verify that the DHA has established maximum allowable rates for breast pumps and replacement parts that prevent suppliers from overbilling the DoD.

The DHA Director agreed with our recommendation to review and pursue appropriate action, such as recouping any overpayments from suppliers that billed excessive amounts for breast pumps and replacement parts, stating that the TRICARE West Region contractor was successful in recouping $718,559.20 to date from one supplier. Therefore, the recommendation is resolved but remains open. We will close the recommendation once we verify that the DHA took appropriate action, such as recouping any overpayments from other suppliers that billed excessive amounts for breast pumps and replacement parts.