Medicare Reform Bill Passes, Includes Competitive Bidding

WASHINGTON — After months of intense debate and political infighting, including a pre-dawn vote in the House of Representatives and a day-long showdown in the Senate, Congress passed a sweeping Medicare reform bill in late November. At press time, President Bush was expected to sign the measure into law on Dec. 8.

Negotiated in conference committee since the summer, the final version of the reform package is a compromise agreement that gained late favor after endorsement by AARP, the powerful seniors group with 35 million members. The main component of the legislation, which marks the first major overhaul of Medicare in its 38-year history, is a new prescription drug benefit for the 40 million beneficiaries now covered by the vast government program. But the bill’s provisions also include a number of measures — chief among them competitive bidding on DME — that involve major changes for home medical equipment providers and the way they conduct their business.

While proponents of the bill — including the President, who had repeatedly called for such a measure — say it will modernize Medicare, its opponents have grappled with the bill’s scope and its costs, estimated at $395 billion over 10 years.

“The big drug manufacturers and pharmacy benefit managers hired by the big insurance companies won a major victory with the passage of the so-called Medicare Prescription Drug bill,” Rep. Mike Ross, D-Ark., said in a statement after the Nov. 22 House vote, which was held open for a record two hours and 51 minutes. “Regardless of political party affiliation, it can be agreed the Medicare Prescription Drug bill passed by the Republican leadership offers nothing more than a false hope and a false promise for our seniors.”

DME Takes a Hit

Ross, who owns an Arkansas HME business with his wife, told an audience at Medtrade in October that drug companies have more than 600 lobbyists on Capitol Hill and donated more than $100 million to political campaigns over the last three years.

Though a smaller Washington voice, the HME industry lobbied hard against competitive bidding provisions in the bill, which Ross said will limit competition, limit choice and hurt patients. A months-long grassroots effort, spearheaded by the American Association for Homecare and supported by manufacturers, buying groups and affiliated health care organizations, included more than 20,000 letters to Congress from HME providers and their customers.

DME provisions in the bill include:

• a five-year freeze, from 2004 to 2008, in the Consumer Price Index update for DME and off-the-shelf orthotics.
• competitive bidding for products to be determined by the Department of Health and Human Services in the nation’s 10 largest metropolitan statistical areas in 2007, transitioning to the top 80 MSAs in 2009. After that date, HHS may expand competitive bidding nationwide.
• beginning in 2005, reimbursement cuts for items including oxygen and oxygen equipment, nebulizers, manual and power wheelchairs, diabetic lancets and testing strips, hospital beds and air mattresses, according to the conference agreement and legislative language. The payment will be “based on the difference between the amount that was paid for the item in 2002 and the median FEHBP (Federal Employee Health Benefits Plan) price” with certain qualifications, according to an interpretation from AAHomecare. At press time, the association was continuing to dissect what Kay Cox, president and CEO, termed “very ambiguous language.”
• reduced reimbursement for inhalation drugs from 95 percent to 85 percent of the AWP (average wholesale price) starting in 2004, transitioning to an average sales price-plus-6-percent reimbursement system in 2005. Infusion drugs will remain frozen at 95 percent of the AWP, then will be subject to competitive bidding in 2007.
• mandatory accreditation for providers to be reimbursed by Medicare and to qualify for competitive bidding for Medicare business.

Industry Fights On

The picture is brighter for home health. The bill includes a 5 percent rural add-on for one year, beginning April 4, 2004. A home health copayment, proposed in the original House version of the bill, did not make it into final legislation.

Other home health provisions include a reduction of 0.8 percent in the market basket update for most of calendar year 2004 through the end of calendar year 2006; a two-year, three-state demonstration project to clarify the “homebound” definition; and other demonstration projects involving adult daycare services and criminal background check requirements.

While the full impact of Medicare reform legislation on the HME industry remains to be seen, stakeholders say the fight is not over.

“I know everyone is discouraged, but sometimes you lose a battle,” said Bruce Callahan, president and CEO of Ultra Care, Melrose Park, Ill. “You must pick yourself up and start fighting again.”

“We were able to delay national competitive bidding until 2007. Many thought there was no way to prevent its immediate adoption. With a little luck and a continued, strong legislative effort, we may yet get NCB off the table for good,” said Jim Walsh, president of VGM Management Ltd. and general counsel for The VGM Group, Waterloo, Iowa.

“We will continue to work with congressional members to keep this industry strong,” said AAHomecare’s Cox. “We will work with all of our allies to fix the problems created by these provisions that do anything to harm our beneficiaries and their constituents.”