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Billing and replacement practices of blood banks and hospitals have caused substantial Medicare overpayments for blood and blood products. Blood banks have prevented the use of blood replacement credits to reduce blood fees whenever Medicare would pay the fees. Hospitals have not followed other Medicare billing instructions, further inflating Medicare charges for blood. Monitoring by the Department of Health, Education, and Welfare and its authorized intermediaries--such organizations as insurance companies authorized to pay for services--has been inadequate to identify and correct these problems. This report recommends that the Secretary of Health, Education, and Welfare direct the Administrator, Health Care Financing Administrator, Health Care Financing Administration, to clarify Medicare blood billing instructions, improve monitoring of blood bank replacement and hospital billing practices, and initiate appropriate recovery actions.