Summary of the DME Provisions in the Medicare Prescription Drug Bill

While the bulk of the 700-page bill is devoted to providing seniors a prescription drug benefit, there are numerous other provisions changing the existing Medicare Program. Among these are a number of DME provisions that include numerous payment changes to the DME benefit.

Following is a summary of the DME provisions contained in the Medicare Prescription Drug bill.

1. Mandatory Accreditation/Quality Standards:
   1. The Secretary must establish and implement quality standards, to be applied by independent accreditation organizations, which DME suppliers will be required to comply with to furnish DME and to receive and retain their Medicare Supplier number.
   2. Within one year of the date the Secretary implements the quality standards, the Secretary shall designate and approve one or more independent organizations.
   3. These quality standards apply to DME, prosthetic devices and orthotics and prosthetics, medical supplies and parenteral and enteral nutrition (PEN). The standards will be applied prospectively and shall be published on the CMS web site.
   4. Effective Date: not specified.
       
2. 'Clinical Conditions for Coverage' or Face-to-Face Examination Required:
   1. The Secretary shall specify certain items that require a face-to-face examination of the beneficiary by a physician (or other qualified prescriber) and a prescription before a supplier can submit a claim to the Medicare program.
   2. Effective on the date of enactment this will apply to power wheelchairs.
   3. The Secretary shall require these standards to be applied to items for which the Secretary determines that there has been a proliferation of use, consistent findings of charges for items not delivered, or consistent findings of falsification of documentation.
       
3. Competitive Acquisition:
   1. Competitive acquisition areas shall be established in 10 of the largest MSAs in 2007 (NY-Northern NJ, LA, Chicago, Washington-Baltimore, San Francisco-Oakland-San Jose, Philadelphia-Wilmington, Boston, Detroit, Dallas and Houston), and in 80 of the largest MSAs in 2009.
   2. The first items to be included will be the highest cost and highest volume items or those the Secretary determines have the largest savings potential. Competitive acquisition applies to the following items: DME, including items used in infusion and drugs and supplies used in conjunction with DME; enteral nutrition and supplies, and off-the-shelf orthotics. Items excluded: inhalation drugs used with DME, Class III devices, parenteral nutrition and supplies.
   3. The Secretary may exempt (1) rural areas or low population density areas unless there is a significant national market through mail order for the item or service; and (2) items and services not likely to result in significant savings.
   4. In the case of oxygen, suppliers providing services before the competitive acquisition program shall be able to continue to provide oxygen to their beneficiaries after the competitive bidding program is implemented (at the bid rate).
   5. The Secretary shall award multiple winners, but may limit the number of winners to the number needed to meet projected demand.
   6. Mandatory assignment (limits beneficiary out-of-pocket payments to 20 percent of allowable), however, this does not preclude use of an advanced beneficiary notice with respect to the provision of a competitively priced item or service.
   7. Mergers/Acquisitions: The contractor shall include a successor entity in the case of a merger or acquisition, if the successor entity assumes such contract along with any liabilities that may have occurred.
   8. Small Suppliers Protection: The Secretary shall take appropriate steps to ensure that small suppliers have an opportunity to be considered for participation in the program.
   9. There is no administrative or judicial review of the establishment of the payment amounts, the awarding of contracts, the designation of competitive acquisition areas, the phased-in implementation, the selection of items and services to be included, or the bidding structure and number of contractors selected.
   10. The Secretary shall establish a Program Advisory and Oversight Committee to provide advice to the Secretary about implementation establishment of financial standards, establishment of requirements for collection of data for the efficient management of the program, the development of proposals for efficient interaction among manufacturers, providers of services, suppliers and individuals, and the establishment of quality standards. This committee shall terminate on December 31, 2009.
   11. The provisions of the Federal Advisory Committee Act shall not apply.
   12. HHS Report: The Secretary shall submit a report to Congress by July 1, 2009, including information on savings, reductions in cost-sharing, access to and quality of items and services, and satisfaction of individuals.
   13. GAO Report: The GAO shall conduct a study on the impact of competitive acquisition of DME on suppliers, manufacturers and patients; and shall include the impact on access to and quality of the items. The GAO shall submit the report to Congress by January 1, 2009, and shall include recommendations.
        
4. Transitional Freeze
   1. For 2004 through 2008 there will be no covered item update, except for Class III devices.
       
5. Competitive Bid Rates Used for Application of Inherent Reasonableness Authority
   1. Effective January 1, 2009, the Secretary may use information on the payment amounts determined in the competitive acquisition areas to adjust the payment amounts for items not in a competitive acquisition area.
       
6. Payment Reductions for Certain Items Based upon FEHBP Prices
   1. Beginning in 2005, Medicare payments for 8 DME items would be reduced based upon the median FEHBP price, as reported in the Office of Inspector General?s June 12, 2002 testimony before the Senate Committee on Appropriations, or any other subsequent report by the Inspector General.* Note that the draft Medicare Conference Agreement identifies oxygen and oxygen equipment as begin subject to reductions, but is not included in this report. The OIG is working on a report on FEHBP pricing for oxygen, which is expected to be released in April 2004. Oxygen will be reduced by the amount identified in this April 2004 report.
   2. The new payment amount would be the number in the column 'Median FEHBP Price.' The difference between the 2002 Medicare payment amounts and the Median FEHBP prices is in the fourth column, this represents that percentage reduction for that item in 2005.

* Current interpretation of the legislative language is that the FEHBP price cuts do NOT apply to the other items in the chart of 16 HCPCS in the June 12, 2002 OIG testimony.