The Xanax mistake that is still costing Medicare millions

What if giving a patient half a Xanax before minor eye surgery qualified as an anaesthetic service under Medicare?

That’s exactly what happened after a 2018 Federal Court decision that redefined “anaesthetic services” – and taxpayers are still footing the bill.

Sydney ophthalmologist Dr Andrew Chang performed delicate eye procedures such as intravitreal injections, where a fine needle is placed into the eye to inject or remove fluid. Two Medicare items applied: for procedures without anaesthetic services, and another, paying 60 to 70 per cent more, for procedures that required them.

The higher-paying item was routinely billed by Dr Chang’s clinic after patients were given a single 0.25 mg tablet of alprazolam (Xanax) about half an hour beforehand. There was no anaesthetist, no monitoring and no assessment of whether the patient needed medication to tolerate the procedure or what their individual risks from taking the medication might be.

When the insurer, Bupa, challenged the claims, the Federal Court (and subsequently the Court of Appeal) sided with the doctor. The dispute turned on a question of legal interpretation: what do the words “requiring anaesthetic services” mean?

The Federal Court took an expansive view – that any calming or sedating measure, in any dose, by any route, by any clinician, could count. That interpretation was wrong.

According to the Australian and New Zealand College of Anaesthetists, anaesthesia means medication intended to produce sedation, regional or general anaesthesia, given by a qualified clinician to facilitate a procedure which would otherwise cause “undue distress or discomfort” if performed without the medication. A standing order for Xanax, offered to every patient without individual assessment, does not meet that test. Giving someone a low dose of Xanax before eye injections is like offering them a glass of wine before a dental filling – soothing, perhaps, but not analgesic and not necessarily required.

The problem was compounded by the absence of anyone in court who understood Medicare billing. Under Medicare’s own rules, a doctor cannot act as both surgeon and anaesthetist on the same claim. The system rejects such claims automatically with “Code 171 – Benefit not payable: provider may only act in one capacity”. That safeguard exists because, clinically and legally, one person cannot fill both roles at once.

Had any billing expert provided evidence, the outcome might have been different. The court appeared persuaded that treating a patient’s pre-procedure anxiety was an anaesthetic service. But the MBS is not a guide to bedside manners; it is a schedule of laws that tie payment to specific, clinically defined actions. Equating a Xanax tablet with an anaesthetic is like saying dimming the lights is equivalent to performing laser surgery because both make a patient comfortable.