Waiving Budget Neutrality for Oxygen Under Medicare

A 2014 final rule laid the groundwork for a new round of competitive bidding for durable medical equipment (DME), prosthetics, orthotics and supplies. The new model applied pricing derived from highly populated Competitive Bidding Areas (CBAs) to all areas of the country without properly taking into account the fact that it costs more to supply DME in non-bid areas. The prices began in 2016, slashing Medicare reimbursement by over 50% on average.

Further reducing reimbursement is the fact that the Centers for Medicare & Medicaid Services (CMS) applied a budget neutrality “offset” to the 2017 rural fee schedules for stationary oxygen equipment. This provision was originally passed by Congress in the Balanced Budget Act of 1997, years before competitive bidding was enacted in 2003. The regulation was not meant to apply to rates derived from the bid program, resulting in rates that were even more unsustainable in rural communities.

At the urging of Congress, patients and providers, CMS issued an interim final rule in 2018 that provided emergency relief to rural areas until the end of that year at a 50/50 blended reimbursement rate. On Nov. 1, 2018, CMS extended the rural relief until the end of 2020. It is unclear what CMS plans to do after 2020. While the relief was much needed, non-rural, non-CBAs did not receive any help.

LEGISLATION

H.R. 8158 would amend both the Social Security Act and the 1997 Balanced Budget Act to waive the budget neutrality offset for stationary oxygen products. The bill was introduced by Reps. Cathy McMorris Rodgers (R-Wash.) and Dave Loebsack (D-Iowa).

While the payment disparity caused by this offset has been somewhat reduced by legislation and by regulations temporarily applying a 50/50 blended rate to oxygen and other DME products in rural areas, these measures are set to expire on Jan. 1, 2021 or at the end of the COVID-19 public health emergency, whichever is later.

OF NOTE

The Protecting HOME Access Act of 2019, H.R. 2771, also featured these provisions. That act combines the budget neutrality fix with permanent relief for suppliers in rural and other non-bid areas. Since Congress already provided relief to these areas through the duration of the emergency in COVID-19 legislation, the House Energy and Commerce Committee requested new legislation be introduced to prepare the budget neutrality provision for committee consideration.

DID YOU KNOW?

More than 37% of traditional home medical equipment companies have closed or are no longer taking Medicare due to pricing from the Medicare bid program. (Source: AAHomecare)

WHAT NEXT?

H.R. 8158 was considered by the Energy and Commerce Committee on Sept. 9, 2020. Committee approval significantly improves prospects for the bill’s passage on its own or as part of a larger legislative package.