Purchasing of upgraded or enhanced durable medical equipment would be simplified under the Medicare bill unanimously approved by the Senate Finance Committee June 18. The provision would make it easier for beneficiaries to buy higher-end DME by incurring only the difference in cost between the upgrade and the standard model as an out-of-pocket expense, with DME suppliers being reimbursed for the cost of the standard item.

Current Medicare policy requires beneficiaries to pay the full amount for higher-end items. Under the Senate bill, "a DME supplier would be permitted to bill the Medicare program for the basic DME item, and receive an additional payment from the beneficiary for the amount of the difference between the Medicare payment and the cost of the enhanced item," a summary of Finance Committee Chairman William Roth's (R-Del.) mark reads.

The DME upgrade provision resurrects a proposal included in the 1995 budget. The provision was eliminated by House/Senate budget conferees in November 1995 ("The Gray Sheet" Nov. 20, 1995, p. 3). Rep. Sherrod Brown (R-Ohio) originally introduced the legislation in June 1995 as HR 1754.

The simplification of DME upgrade purchases is one of a few bright spots in an otherwise bleak Senate Medicare bill for DME suppliers. The measure contains provisions for competitive bidding and increased HHS inherent reasonableness pricing authority not contained in the two House Medicare bills.

The Finance Committee adopted during its June 17-18 markup an amendment by Sen. Bob Graham (D-Fla.) authorizing HHS to implement competitive bidding for all Part B non-physician services, including DME supplies. In a press release, Graham cited reports of excessive payments for surgical dressings, laboratory tests and other products as justifying competitive bidding. In addition to the general Part B competitive bidding program, HHS is instructed "to conduct a demonstration project of competitive bidding for home oxygen equipment," according to the chairman's mark.

Regarding inherent reasonableness authority, the Senate bill "would permit the Secretary to replace reasonable charge methodologies by fee schedules," and give HHS "greater flexibility to determine the appropriateness of payment amounts under Part B (excluding physician services) and adjust payment amounts accordingly," the chairman's mark states.

The Senate bill also contains sharper reductions in DME reimbursements than the Medicare bills passed by the House Commerce Committee and House Ways and Means Committee. The Finance Committee measure would reduce oxygen services reimbursement by 25% in FY 1998 and an additional 12.5% in subsequent years, whereas both House measures call for a 20% reduction through 2002. ("The Gray Sheet" June 9, p. 8)

In response to industry claims that cuts of this magnitude would hurt quality of care, the Senate Finance Committee provision orders HHS "to establish service standards and accreditation requirements for home oxygen providers" and instructs the General Accounting Office to report within six months "on access to home oxygen equipment." HHS is further ordered to "arrange with peer review organizations...to evaluate access and quality of home oxygen equipment." Industry trade associations such as the Home Oxygen Services Coalition and the National Association for Medical Equipment Services argue that a reduction in Medicare oxygen reimbursements will result in decreased quality of and access to services.

The Senate bill also specifies a 2% reduction in the payment update for all DME for the five years through 2002; the House provisions call for a freeze in the current schedule. Finance Committee "provisions would reduce the update by two percentage points for all categories of DME, including orthotics and prosthetics and parenteral and enteral nutrients, supplies, and equipment," the chairman's mark says. Inflation updates for clinical laboratory diagnostic tests also would be reduced by 2% over the five-year period beginning January 1998, and the payment cap would be lowered from 76% of median to 74% of median.

New Medicare coverage for preventative care measures specified in the Senate bill include annual mammograms for all women aged 40 years and over, colorectal screening, and extension of diabetes glucose monitor and testing strip benefits to all diabetics (instead of only type I).

SENATE MEDICARE BILL WOULD SIMPLIFY DME UPGRADE PURCHASES; FINANCE COMMITTEE APPROVES PART B COMPETITIVE BIDDING, 37.5% OXYGEN PAYMENT CUT

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