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Oxygen a Large and Growing Share of Medicare DME Spending

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Summary

Oxygen expenditures as a share of total Medicare DME expenditures grew from 8.5% in 2018 to 9.8% in 2021, with significant variation across states.

Expenditures on All DME and Oxygen

Individuals with chronic obstructive pulmonary disease, pneumonia, sleep apnea, and other acute or chronic conditions may rely on home oxygen therapy and equipment for breathing assistance. Under Medicare fee-for-service (FFS), oxygen products are rented for 5 years at a time with no option to buy. The beneficiary pays a rental fee (20% of the allowed amount) for 36 months and then receives 24 months free. The beneficiary is also responsible for 20% of the maintenance costs over the 5-year period.

Analysis of Medicare durable medical equipment (DME) spending indicates that oxygen (i.e., an oxygen concentrator single delivery port capable of delivering 85% or greater oxygen concentration at the prescribed flow rate) accounted for the highest percentage of total DME spending in Medicare FFS in 2018–2021. Approximately 6% of Medicare FFS beneficiaries with any DME had a claim for oxygen, and roughly a quarter of all Medicare beneficiaries have claims for DME annually. Of the over $8 billion in Medicare DME expenditures, 9.8% were for a type of oxygen product. The average percentage of Medicare DME spending attributable to oxygen products rose slightly between 2018 and 2021; in 2018 oxygen was 8.5% of DME spending and in 2021 it was 9.8% (Figure 1).

Figure 1. Total FFS Medicare Spending (in Millions) on Oxygen and Other DME, by Year
Figure 1. Total FFS Medicare Spending (in Millions) on Oxygen and Other DME, by Year

Total DME spending and DME spending on oxygen varied by state, and the states with the highest (and lowest) spending per beneficiary spending on DME (for beneficiaries with any DME spending) were the same five states with the highest (and lowest) per beneficiary spending on oxygen products. The range between the highest and lowest per-beneficiary spending on DME was $330 per FFS beneficiary in 2021 (comparing $842 in Wyoming to $512 in Rhode Island; Table 1).

Table 1. States with The Highest and Lowest DME Expenditures per Medicare FFS Beneficiary (for Beneficiaries with Any DME Expenditures), Total and Oxygen, 2021
Highest Expenditures Lowest Expenditures
State DME per Beneficiary Oxygen DME per Beneficiary State DME per Beneficiary Oxygen DME per Beneficiary
Wyoming $842 $568 Rhode Island $512 $293
Vermont $769 $525 New Jersey $516 $292
Alaska $753 $527 District of Columbia $519 $287
Nebraska $741 $517 Connecticut $556 $329
South Dakota $739 $522 Maryland $557 $334

Conclusion

The average percentage of Medicare DME spending attributable to oxygen products has been slightly increasing over the past few years. Though spending on oxygen products varies by state, it is aligned with overall spending per beneficiary on DME by state.

Oxygen has long been an important covered benefit in the Medicare program and has been the top spending category for Medicare DME over the past few years. Oxygen is a frequent treatment for beneficiaries struggling with respiratory conditions. Over the past few years, the country has seen an increase in viruses that can exacerbate or cause respiratory problems such as COVID-19, Respiratory Syncytial Virus, and influenza.

Methodology

Avalere performed this analysis using 100% Medicare FFS claims (years 2018–2021), accessed by Avalere via a research collaboration with Inovalon, Inc. and governed by a research-focused Centers for Medicare & Medicaid Services Data Use Agreement. This includes the 100% sample of Medicare Part A and Part B Medicare FFS claims data.

Total payment was calculated as the sum of Medicare payments and beneficiary responsibility (deductible and coinsurance payments).  Oxygen was identified using Healthcare Common Procedure Coding System codes.

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