Medicare Compliance & Reimbursement

Compromise over Medicare legislation harsh on suppliers.

All suppliers' worst nightmares have been wrapped up in one neat package: the newly passed Medicare reform bill. The bill could put the majority of the durable medical equipment industry out of business, critics say. "The bill will be devastating to the homecare industry," says the American Association for Homecare. And it "will jeopardize access to quality care for millions of homecare patients." "It's going to be a disaster," says Joan Cross, president of the Florida Association of Medical Equipment Services. "They're going to be systematically wiping us out." Provisions affecting suppliers include: A three-year freeze on inflation updates, keeping DME payment rates at the same level from 2004 through 2006. Cuts to the top five DME items' rates, to "reflect prices paid" under the Federal Employees Health Benefit Plan. That will translate to reductions of up to 22 percent based on current FEHBP pricing, AAH says. The likely candidates for those top five items are oxygen, wheelchairs, nebulizers, diabetic supplies and hospital beds/air mattresses, the association adds. Nationwide competitive bidding. The bill proposes bidding in "the largest MSAs" beginning in 2007, ramping up to 80 metropolitan statistical areas by 2009. And in 2009 the bid prices for the items under consideration would be applied to ALL items. Drug reimbursement rates reduced to 85 percent of average wholesale price in 2004, then switched to average sales price (ASP) plus "an additional percentage beginning in 2005." The summary doesn't spell out how ASP will be calculated, but it's generally thought to be the average acquisition price of the drug including rebates and other discounts, AAH says. The additional percentage is expected to be 3 percent.

"We aren't too thrilled about the package," says Erik Sokol with the Power Mobility Coalition. The bill will pile on a number of reimbursement-reducing measures for power mobility products: the inflation freeze, the unspecified cuts to FEHBP levels, and eventually bidding. Plus the Centers for Medicare & Medicaid Services is sharpening its knives to make cuts using its inherent reasonableness authority. CMS Administrator Tom Scully repeatedly has vowed power wheelchairs will be first on the IR review list. "Overall, it's a big loss," Sokol says. One of the problems with reducing payment rates to FEHBP levels is that the program generally services a healthy, younger population in comparison with the Medicare population, AAH notes. And the program may not have the intensive documentation and regulatory requirements that increase overhead for serving Medicare patients. But the impact of those reductions will pale in comparison to the devastation a national competitive bidding program will bring, experts say. "People are just panicked," Cross tells MLR.