Analyzing Recent Policy Developments

The start of a new year provides an opportunity to review 2017 and plan for 2018. From a Washington, D.C. perspective, hindsight is always 20-20 and forecasting is infinitely less clear. One year ago, we could not have known that former Rep. Tom Price would serve as Secretary of the Department of Health and Human Services, that his tenure would be brief, and that the Republican Congress, with a Republican President, would try, and fail, to repeal and replace the Affordable Care Act.

2017 was full of policy developments affecting the home medical equipment (HME) and complex rehab technology (CRT) industries and the consumers we serve, and they were more positive than not. I continue to be optimistic.

21st Century Cures Law—Some Good, Some Not So Good Outcomes

As we began 2017, we were riding high on the recent Capitol Hill victory where Congress, in the 21st Century Cures law, provided retroactive payment relief in non-bid areas (for the latter half of 2016) and extended payment relief for another six months for accessories used with complex power wheelchairs. HME providers received those additional 21st Century Cures payments last year.

Also included in that 21st Century Cures law was a provision accelerating to January 1, 2018 the effective date of a policy that will limit to the local Medicare payment amount the federal portion of state Medicaid durable medical equipment (DME) fee-for-service payments. The Omnibus Appropriations law of 2016 (signed into law December 2015) included this provision, and it will result in reduced federal monies provided to state Medicaid programs. It will impact payment levels for CRT, oxygen and other DME items.

The Centers for Medicare & Medicaid Services (CMS) will require state Medicaid programs to demonstrate that the state is not spending more than what Medicare would have paid for the relevant DME items (primarily E and K HCPCS codes), even though the law only requires the federal portion to be limited to the Medicare payment amount. Further, while CMS acknowledged that the law does not require states to pay the Medicare rate for DME, CMS has suggested that states “look at their Medicaid DME payment amounts and claims to determine if setting payment rates at or below the Medicare payment amount is a reasonable approach for compliance,” and states that do so will be exempt from the administrative reporting requirements to CMS. States will therefore have a significant incentive to simply set payment amounts at the Medicare rate. CMS is also informing the states that CMS will use the lowest Medicare rate in the state when making its payment comparison.

We will likely not know until well into 2018 exactly how states will respond. What we do know is that states with more managed care will be significantly less impacted; and CRT items will likely be more impacted than other DME items (including oxygen) because many state Medicaid programs have had significantly higher fee-for-service rates than the local Medicare rates for these items.

Importantly, the impact will be most significant in the nine states with the most amount of Medicaid fee for service-based payments. On the other hand, the states that will be least impacted will be those with more managed care—33 states have 70 percent or more managed care-based payments.

Although the reduced federal payments will be effective for claims with dates of service starting January 1, 2018, CMS will require states to do a retroactive reconciliation of 2018 payments by mid-2019, based upon the state’s actual 2018 DME fee for service payments. Calculations will be based on aggregate fee for service expenditures for all Medicare/Medicaid covered DME/CRT HCPCS codes. States will then have to return to the federal government the identified overpayment amount. If you are doing business in a state with more fee for service-based payments, make sure you work closely with your state/regional association and your national associations.

Rural Relief

In 2017, the HME industry made great progress on Capitol Hill in garnering support for further payment relief in non-bid areas. On November 2, 2017, the “Protecting HOME Access Act of 2017” (H.R. 4229) was introduced in the U.S. House of Representatives. This bill would provide retroactive payment relief to HME providers serving Medicare beneficiaries in non-competitive bid areas. If enacted into law, H.R. 4229 would extend payment relief for services provided from January 1, 2017 through December 31, 2018. The rate would be the higher rates that were in effect January through June 2016, and would apply to DME items included in the bid program but that are provided in non-bid areas: oxygen, standard wheelchairs, hospital beds, etc. The payment level would be increased approximately 25 percent. In addition, the bill would also remove the “double dip” for oxygen that has resulted in lower Medicare payment amounts for oxygen concentrators (E1390) in some non-bid areas. H.R. 4229 mirrors the contents of a federal rule that at press time was awaiting clearance from the Office of Management and Budget.

The bill’s lead members, Rep. Cathy McMorris-Rodgers (R-WA) and Rep. Dave Loebsack (D-IA), were joined by over 50 original co-sponsors, an impressive number. At press time in mid-December 2017, the bill had the support of 94 co-sponsors, and was growing almost daily.

Payment for CRT Accessories

In 2017, CRT providers, and the consumers they serve, achieved a significant victory when CMS reversed its earlier position and announced in late June 2017 that it would continue to pay for accessories used with complex power wheelchairs at the non-competitive bid payment rate. As 2017 was closing, we continued work to extend the same protection for accessories used with complex manual wheelchairs. With bills (H.R. 1361, H.R. 3730, S. 486) in both the House and Senate to address this issue, the industry, and consumers who need access to these items, we have a strong foundation to fully address this issue in Congress in the near term.

MedPAC Dives into DME

Late in 2017, Med PAC (the Medicare Payment Advisory Commission, the Commission charged with advising Congress on policy changes to the Medicare program), dove into the world of DME payment policy. At its November 2017 meeting, MedPAC staff briefed the Commissioners on its view of the results of the Medicare competitive bid program and payment policies for non-bid items and in non-bid areas. After their review, the staff recommended to the Commission ways to “improve payment accuracy” and “enhance beneficiary protections.”

To improve payment accuracy, the staff said CMS should expand the bid program to include more DMEPOS items. To improve payment accuracy, staff recommended that CMS reduce payment rates for certain non-bid products annually until they were “in line with private rates.” Staff also recommended that beneficiaries should be protected from “adverse balance billing” practices by placing a cap on balance billing and reducing the allowed amount by 5 percent for non-participating suppliers.

Note that the Commission may include these recommendations in its annual report to Congress, scheduled for March 2018 publication. Typically, MedPAC makes recommendations that require Congress to act; CMS cannot implement most changes under its current legal authority. This will be a priority issue for early 2018.

New issues will emerge as 2018 advances, bringing continued opportunities to stay engaged to understand the impacts on your business.

Read our full January 2018 State of the Industry coverage here.