A New Medicare Era

The new Medicare law signed by President Bush on Dec. 8, 2003, includes a number of reforms that affect Medicare beneficiaries and the home care providers who serve them. The following highlights of portions of the law from the American Association for Homecare’s Asela Cuervo, senior vice president, and Ann Howard, director of federal policy, will give you the basics, as will AAHomecare’s accompanying summary of certain provisions. The summary chart is available in its entirety to association members at www.aahomecare.org. To view the entire law as it is written (678 pages), visit http//thomas.loc.gov.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) has two primary purposes: to provide prescription drug coverage for Medicare beneficiaries and to encourage as many beneficiaries as possible to consider an extended array of benefits offered through new private “Medicare Advantage” plans. Durable medical equipment companies need to position themselves to participate in these plans as the new Medicare era unfolds.

The MMA contains significant changes to Medicare reimbursement for home care companies that provide durable medical equipment prosthetics, orthotics and supplies (DMEPOS) items and services. A freeze in the Consumer Price Index update for these items is already in place, with reimbursement rates frozen at what they were on Dec. 31, 2003.

Likewise, there has been a reduction in the Average Wholesale Price for inhalation drugs. The MMA provides for a reduction in reimbursement for these drugs of as much as 15 percent from last year’s reimbursement, or to 80 percent of AWP. Most drugs, however, will be reimbursed at 85 percent of AWP for 2004.

In 2005, reimbursement for inhalation drugs shifts to a new reimbursement model. The MMA calls for inhalation drugs to be reimbursed at 106 percent of the manufacturers’ Average Sales Price, but a number of questions remain with respect to the way in which CMS will implement ASP. The statute describes ASP as an amount that is net of any discounts, rebates or other incentives. This suggests that Congress’ intent was to approximate the average acquisition cost for these drugs. AAHomecare will be meeting with CMS to find out what their intent is for moving forward on implementing the regulation.

Yet another reimbursement provision that affects DME companies also becomes effective in 2005. The MMA provides for a reduction in reimbursement for certain items of DMEPOS based on data comparing Medicare reimbursement with reimbursement under the Federal Employees Health Benefits Program (FEHBP) collected and reported by the Office of Inspector General (OIG) for the Department of Health and Human Services. The size of the potential reduction for some items, such as oxygen, is still uncertain, but data published by the OIG in 2002 suggest that the reductions could be in the range of 3 percent to 22 percent.

Finally, the MMA calls for accreditation for suppliers who bill the Medicare program, and national competitive bidding beginning in 2007. There are many issues that remain open as to how these two provisions will be implemented. For example, the accreditation provision requires the Secretary of Health and Human Services to develop standards that will be administered by accrediting bodies.

The Secretary also may exercise discretion in several areas of competitive bidding, such as exempting certain products or geographic areas from competitive bidding. Moreover, the competitive bidding provisions will have far-reaching implications on reimbursement even for areas not subject to competitive bidding, because the bid prices can be applied nationally to adjust existing fee schedules.

Our plate is full this year at AAHomecare. We will take every opportunity to ensure access to quality services and products for our nation’s disabled and elderly.