The inspector general at the U.S. Department of Health and Human Services denounced Medicare for failing to follow its policies of checking the acquisitions and ensuring they matched orders from physicians. 

Officials from the health insurance program miscalculated the amount of illegal payments in 2006 for medical equipment, wheelchairs and prosthetic devices counting among them, according to a federal audit.

The report completed by the HHS inspector general's office, which was based on a series of claims for Durable Medical Equipment (DME), proved the fact that an estimated 30 percent of the claims were made inappropriately. However, they were compensated by the government health-care program.

Estimations of Medicare officials show that Medicare spend roughly $700 million on improper payments in the fiscal year ending Sept 30, 2006. The error rate for durable medical equipment was an estimated 7.5 percent, said the Centers for Medicare and Medicaid Services, a federal agency within the United States Department of Health and Human Services (DHHS) that administers the Medicare health-care program. 

However, the inspector general for the DHHS said the error rate its supplier found was of 28.6 percent. The raise was a result of 369 claims used in the government's preceding calculations which were double-checked.

Data from Medicare, which is partly financed by payroll taxes imposed by the Federal Insurance Contributions Act, shows that approximately $9 billion a year are paid for durable medical equipment, such as oxygen tent, iron lungs, hospital beds and wheelchairs. Annually, total federal government spending goes up to $429.7 billion.
 
The Office of Inspector General (OIG) looked at only a small number of the total claims from 112,000 medical devices and equipment contractors. Due to the fact that the samples weren’t selected randomly, the aforementioned report included an admonition about applying the figure to the whole social insurance program.

In order to count the error rate for medical-equipment claims, the inspector general for the DHHS recommends Medicare to analyze all medical records for DME claims, provided by all the suppliers. 

Chuck Taylor, a spokesman for auditing supplier AdvanceMed, refused to discuss the matter, claiming its agreement doesn’t allow him to comment without Medicare consent. AdvanceMed is a professional staffing company which provides qualified healthcare professionals to medical facilities on a nationwide basis.

A Medicare official argued the report, maintaining that it didn’t exist a written policy that obliged AdvanceMed to employ medical records in order to assess the 2006 error rates. The Medicare’s auditor had "discretion" not to do that way, stated Timothy Hill, director and CFO of the Office of Financial Management at the Centers for Medicare and Medicaid Services.

"An oxygen concentrator, costs about $600 (to buy) on the open market," said U.S. Health and Human Services Secretary Michael Leavitt. However, Medicare pays $198.40 each month to rent the device. Renting it for a period of three years costs $7,142, so the receivers pay more than double the cost of purchasing it.